My 2002 Chevrolet Tahoe that turned 200,000 miles earlier this year. I’ve had her for 12 years. I was able to travel to all seven continents before age 30 because I didn’t have a car payment.
This article will take you two (2) minutes to read…the same amount of time it takes a New York bagel shop to prepare your sesame bagel sandwich and coffee with one sugar and two creams.
Last week, a good friend asked me to give a talk on financial independence. I teach leadership and financial literacy classes to every freshman athlete at the University of Texas so I understand the need for sound financial training. And let’s face it, the high school curricula are jam-packed with standardized testing prep courses. Financial literacy is not on the top of the priority list.
My wife Hilary and I are not experts, but we do pride ourselves on creating a comfortable cushion for rainy days and college tuitions and we relentlessly search for ways to keep our costs down. Here are our Big 5 rules for financial freedom.
- Establish the Big Scary Goal (BSG) – My wife Hilary and I have four kids (and we may have a fifth, pray for us!). Our big scary financial goal is this: to pay for the undergraduate college tuitions (in cash) for each one of our kids. Whether they want to attend Harvard or Hardin-Simmons, we are going to cover the bill. We both believe that college is a perspective multiplier – that it provides one of the better opportunities to expand one’s life projections. So we are going to sacrifice in the short term to make it happen. That goals serves as the foundation for what you will read below.
- A Tale of Two Accounts – To instill personal discipline we set up two accounts. One account is a savings account that we never touch. 15 percent of income goes directly to that account. We don’t have any debit cards associated with that account. We don’t have a checkbook for that account. We don’t check the monthly statement for that account. We just stash cash and keep our hands off of it.
- Maintain Zero Credit Card Debt – Credit cards are the bane of human existence. Yes, I know all of the benefits of having them. Here is a simple rule: Pay off your credit card at the end of each month. Period. Key words: Don’t Swipe if you Can’t Wipe. Translation: If you can’t pay for it when the monthly statement is due, don’t buy it.
- 6 Months Of Cushion – Every year, I take on three coaching clients. All of them are people who want to quit their jobs and move to another profession. The first question I ask them is whether they can survive without income for six months. The answer is always – no. Calculate your expenses for six months – stash cash to cover that amount. Don’t touch it.
- Buy Your First New Car At Age 65 – Get that nice convertible when you retire, but don’t do it until then. Why invest your money in an armpit of depreciation? And if you’re trying to keep up with the Joneses, remember: