It's in our nature to adjust our lifestyle according to our income. We get a raise and we then go out and buy a new car or bigger house. We might also buy new clothes or go out to eat more often. This is why there are many people out there making $150k+/year and are completely broke.

My advice for young people is to live as cheaply as possible for the first 5-10 years of your career. Buy or rent a modest home and live there for as long as possible. Keep your cars as long as they run. Every time you get a raise, don't adjust your lifestyle accordingly; save this extra money!

I know this is difficult because it's typically the first time in your life that you actually have a decent income. It opens up so many more opportunities to finance fun things like houses and cars. It sounds so simple: "all I have to do is make that monthly payment." But pretty soon you'll have several monthly payments stretched out over many years. The possessions you financed will get old over time and that monthly payment will become a chore and a burden on you and your family.

Stay out of debt and save up for large purchases. You'll save a ton in finance charges and you'll be in a better position to truly decide if you want to spend your "saved" money for an item. When forking over a large amount of cash, you may re-evaluate your potential purchase.

1 comments

  1. Eclectic Works // January 31, 2008 at 5:12 PM  

    You have a lot of great advice! I'm not young but I can use this also. Thanks for posting this!
    Thank you for your kind comment on my sons work :)