If you're new here, this blog will give you the tools to become financially independent in 5 years on a median salary. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger of losing their jobs.
Here's almost a thousand online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before looking for the crowd's wisdom for your particular situation in the forum journals.
If you enjoy the blog, also consider the book which is much better organized and more complete. You can read the first chapter for free, listen to the preamble, or see the reviews (1,2,3,4,5,6,7,8,9, A,B,C,D,E,F,G,H,I,J,K,L,M,N,O,P,Q,R,S,T,U,V,W,Z). Subscribe to the blog via email or RSS. Get updates on the facebook page, join the forums, and look for tactics on the ERE wiki. Here's a list of all the ERE blog posts.
Think back a few years.
Were you one one those people who lived within their means, bought and lived in a house you could afford on your income, and took out a conservative fixed rate mortgage and steadily paid it down.
Or were you one of those people who bought a bigger house than you could afford on your income, got a cheap but risky adjustable rate mortgage, perhaps with zero money down, and maybe even took out home equity to boost your standard of living? Did you by any chance not even live in the house? Maybe you were just out to make a quick profit flipping houses which at the time seemed to be the national pastime for recent geniuses.
Kudos to you if you belong to the latter category: The white house just bailed you out!
The reason is of course that there are more subprime borrowers than there are subprime lenders.
That’s democracy or short-term populism at work and it will probably result in the housing crisis dragging on for longer than it should have, since people are allowed to keep living in houses that they can not afford by their contractual agreements.
This tendency to create moral hazards leaves me slightly worried. Those of us who are conservative and responsible with our money are somewhat of a minority and thus quite disadvantaged when it comes to political solutions to financial problems. Here I am of course thinking about the underfunded ticking time bombs of social security and medicare/medicaid. Something to consider …
Originally posted 2007-12-08 16:32:00.
