Living like you’re rich - before you are

A post over at Free Money Finance caught my attention recently. The post references an article in Kiplingers Personal Finance Magazine called The Invisible Rich.

The concept is very simple - people live above their means, and it costs them in the future. Many young adults drive more expensive cars than they need, and live in a bit nicer apartment than they probably should. Chances are they’ve got an awfully nice ( and expensive, of course ) television sitting in their living room, and tons of gadgets here and their. Their closet is likely filled with clothes that cost too much as well. These same people complain that they won’t be able to own a home - they wouldn’t be able to save enough for a significant down payment, let alone stroke the big mortgage payment every month.

These people live in stark contrast to ‘the invisible rich’ - the people who simply live below their means, and save money. They have a smaller apartment when they’re younger, they don’t drive fancy cars, and they keep their electronics purchases to a minimum. When they do purchase a home, it’s more modest than many, and the down payment will be sizeable. These are the people who grow their net worth every single month - not because they are ‘rich’ per se, but because they live within their means.

Where do I fall between these two groups of people? Well, I started in the first and I’m transitioning towards the second. I have tons of electronic gadgets; though I have thankfully restrained myself from purchasing a big-screen TV and home theater system. I recently sold a V-8 high-dollar sports car and bought a Honda Accord. My other vehicle is a leased Lincoln Navigator, which will be returned to Lincoln in about a year and a half once the 3-year lease is up. At that time I’ll buy something smaller, and powered by a 4-cylinder engine. Likely a Honda Civic, maybe another Accord, or possibly an Altima Coupe. I still have time, and I’m sure there will be some good, reliable, economic choices available then. Financially speaking, I should buy a used car, but I can’t bring myself to do that anymore. The risk of mechanical failure simply aren’t acceptable to me. If my car fails and I can’t get to work reliably, then I’ll sure wish I bought something newer. And I would never risk my wife in a car that had excessive miles, and I didn’t know the history of.

As far as apartments go, I live in a nice, but not extravagant apartment. I could live in a less expensive place, but it would be too crowded, and in a much less safe area. Again, not a risk I’m willing to take. My furniture is nice, and should last for quite some time. I don’t plan on making any major purchases for the next couple years ( new car aside ) , so I don’t have any big foreseeable expenses. I’m working hard to live more frugally, and put money away each month. When it’s time for me to buy a home, I certainly want to have a sizeable down payment, so I can keep my mortgage very reasonable, and continue to build savings for the future.

How about you - what category do you fit in?

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