Done To Zen

2million’s Personal Finance Blog rationalizes the house that got away.

As a rule a thumb I have to believe its better to minimize our living expenses (ie read smaller house) rather than maximize them (read big house that just got away)

Too true. The only thing I would say is that rather than buying a house that is exactly what you need, it might make more sense to buy a house that is slightly larger but still within your budget so you can rent out one or more rooms. As long as the differences in the sale prices isn’t atrocious and you can comfortably afford the higher mortgage, IMHO, this will be better in the long run.

Todd at Harvesting Dollars gives us the stages of wealth accumulation:

1. Spend less than you earn
2. Save 10% of your income towards retirement
3. Save 25-50% of your annual expenses
4. Your investments earn, in an average year, as much as you are able to save.
5. Your portfolio, on average, returns 50% of your annual expenses (after taxes)
6. Your portfolio, on average, returns 100% of your annual expenses (after taxes)
7. Your portfolio returns more than 100% of your expenses, even when invested conservatively (as conservative as you deem prudent when you are in retirement), including adjustments for inflation. This is the last stop on the wealth spectrum.
8. [Done's comment - what is this? the bonus stop? ;-)] Your portfolio earns more than stage 7. Relax, enjoy, give.

I more or less agree with all these milestones. Maybe I would have added two steps for reaching 25% and 75% of annual expenses, but otherwise, I have no big changes to make. Currently, I’m at step number 3, trying to reach step number 4. Let me think, how much do my investments make currently? About $10 a month (if I don’t count 401K, which I can’t/don’t since I can’t touch the money for 40 years), so I still have a long way to go.

Ron over at The Wisdom Journal lists the 10 commitments we should make for our own financial success:

1. Commit to spend less
2. Commit to earning more
3. Commit to having an adequate life insurance
4. Commit to investing wisely
5. Comit to using free money
6. Commit to knowing what you want
7. Commit to educating yourself
8. Commit to avoiding high-interest credit
9. Commit to learning to negotiate
10. Commit to giving

I’ve already committed to and do numbers 1, 2, 4, 6, 7, 8, and 10. I sort of do number 5 - I definitely go for the 401K match but am procrastinating on applying for a credit card that offers free cash-back guarantees (I have only one credit card, which I usually use for everything, sans this month, when I’m on credit fast, but it’s terrible and offers nothing).

Ron over at The Wisdom Journal asks another excellent question: what will your children inherit from you? 10 hard questions to ask yourself:

1. Do you have financial goals for the next year, the next five years, and beyond?

Yes and they are well-defined, but I wonder whether they are attainable?

2. Do you have a spending plan for the next 12 months?

Umm. No. Never even thought about it. Maybe I should.

3. Do you know how much debt you’re carrying and do you have a workable plan to pay that debt?

None and, so, no. :-)

4. What would happen to your family financially if you lost your job or lost your ability to create income?

I’ll be OK for a month but after that I’ll have to borrow from my family or declare bankruptcy. But as I’m adding substantially to my emergency fund each month, my worst case scenario should only get better after each month.

5. Do you spend impulsively, either on big things or little things?

No. :-)

6. What does your lifestyle communicate to your children about your values?

Never thought about it. I don’t have kids yet, so fortunately I have some time to come up with an answer. :-P

7. Are you saving and investing for the future?

Yes, but I wish I could save and invest more.

8. Do you have a will?

Uhh, no.

9. Do you and your spouse ever disagree on money matters in front of the kids?

I don’t have a spouse and I don’t have kids, so no for now. ;-)

10. If someone, who did not know you, were to write a story about your life based only on your checkbook, what would that story say?

Not much - I used my checkbook all of 3 times the last year. ;-) In all seriousness, I think the story will be fairly positive so far. I always saved around 50% of my income, gave generously, and can’t think of a time when I spent money on impulse purchases. What I did splurge on was books, but I estimate I spent a grand total of $1000 over the year…