I am a dad, carpenter, writer, and retired software engineer who has been living in Longmont since 2005. I used a few simple but powerful life principles to become wealthy enough to retire at age 30, and went on to start a blog called Mr. Money Mustache that has now reached over 30 million people in the past nine years. Now it’s time to take these ideas to the streets of Longmont, so send in your questions about money and life!
Many people in Longmont have no savings, can’t buy a house or invest and barely make rent and bills. What advice do you have for these folks? — Justin Justice
This is a very common problem, and of course every life is different. But in the big picture, if a person is broke, it’s because they are spending everything they are earning - so you can attack the problem by spending less, earning more, or both.
For most people, spending is much easier to control. I always suggest that people start actually tracking it - make sure you know exactly where every dollar is going, and never spend anything that wasn’t part of your plan.
Then you can get into specific improvements in the big categories: housing, transportation, and food. If you’re living alone in a 1 bedroom apartment, can you switch to a 2-bedroom and share the rent with someone? What about renting a room in a house?
Transportation is a big one - most people don’t realize how expensive it is to drive their cars because the only really obvious cost is buying gasoline. To make it real, imagine that gas was $15 per gallon, and that it cost you $250 every time you filled up your tank. This is the real total cost of driving after you include the car itself, maintenance, tires, oil changes, insurance, registration, crashes, tickets, and all the other costs that come with a car.
The less you drive, the less all of these things cost - so get a bike and use that most of the time, move closer to work if you can, and start planning local fun instead of things way out in other towns in the mountains.
If you have a truck or an SUV, sell it and replace it with a small car, if you need a car at all. For most people, taking these steps alone will make a difference of $500 per month or more.
And finally, FOOD - if you are ever eating at restaurants, even fast food, cut it out entirely and start making your own meals, packing your own lunches, and get your food from an affordable grocery store like King Sooper’s or Sam’s club. Another several hundred per month, straight into your pockets.
As a bonus, look at monthly subscriptions: switch to an affordable cell phone plan (like Mint Mobile at about $20 per month), cancel cable TV if you have it, get competing quotes on car insurance from all the majors including Geico, and cut anything else that bills you monthly.
All of these actions will drastically improve your cashflow. There will suddenly be money in the bank at the end of each month. And your job is to send it - ALL of it - straight to paying off debt, starting with the highest interest rates. Credit cards, then any personal loans, then car loans. After that, come back to me again and we can talk about investing.
Have a question for Pete? Email firstname.lastname@example.org.
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