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More by luck than good management

 
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… which is a common saying on this side of the Pond, whose meaning should be obvious.

You tell us in the book how you managed to earn money from rents, and also how you resisted the usual young person's temptation to spend all the money you have.
Do you think everybody can emulate what you achieved, or only some people, or everybody partially?
 
Campbell Ritchie
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A few minutes ago, I wrote:. . . young person's temptation . . .

And why did I say young person? As if us older people didn't fall into the same traps?

And I must win the book; I really need two copies, don't I

And while we are on about older people, to what extent do you think people can benefit from your advice even in advanced years?
 
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Campbell Ritchie wrote:… which is a common saying on this side of the Pond, whose meaning should be obvious.

You tell us in the book how you managed to earn money from rents, and also how you resisted the usual young person's temptation to spend all the money you have.
Do you think everybody can emulate what you achieved, or only some people, or everybody partially?



Sure. I definitely think anyone can emulate it. It is a matter of setting a standard for yourself and choosing to live by that standard.

I decided that I wanted to be financially successful, so I was willing to make short-term sacrifices in order to have long term gains.
I decided that I would save and invest instead of spending for short-term enjoyment.

It's all about realizing that the decisions you make right now will determine the kind of life you have 5 years from now and realizing that, unless you die, that time--5 years from now--will come.

Once you realize that you can send gifts forward in time to yourself, and that when you do, they increase greatly in value, you are much more motivated to send as much forward as you can.

You also realize that living below your means isn't really that much of a sacrifice at all. The things that you "think" make you happy are not the things that actually make you happy...
 
Campbell Ritchie
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John Sonmez wrote:. . . gifts forward in time to yourself, . . .

That is a very interesting way to look at it. I shall have to remember that phrase.

The earlier you learn to live “below your means”, the easier, and the more opportunity you have to invest in gifts for yourself in twenty years't time.
 
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Interesting discussion.

The most important thing to save money, is to track and limit your spending, and have this limit constant. What does it mean constant? Getting a raise or bonus doesn't mean that you can spend more.

In my household, we are doing home bookkeeping and track every single expense. On the end of every week we check our accounts and wallets to see if all the bookkeeping has no mistakes. That way, we have perfect track on where we spend our money, and how much. GnuCash is a wonderful software for this purpose with well written documentation. Every month we review our spending and we try to identify places where too much money are going.

The other great thing that we implemented are limits, or budgets. We have set a monthly budget we can spend on food or items like detergents and so on. We call this budget "groceries". Another budget is "pocket money". This is a budget that I and my wife have for buying our own items. We have both our own budgets, and unused money from budget come for another month. We use those budgets to buy own stuff, like books, cinema tickets, and so on. Things like education or bills have no limits, but we track those expenses so nothing gets too big.

This methodology works wonders. Why? Because we have very predictable spending every month. Groceries and pocket money are constant every month. All the money that are left are being transferred to saving account. Just after a first few months we saved very significant amount of money. We are really happy with that system. Maybe we cannot get fun things that we want now, but seeing the growing amount of money on the savings accounts is much better feeling.

Another thing is the right mind set. During my childhood, pretty much until the time I left home, we were living pretty poor. Very often there was barely anything in our fridge, bailiff was threatening us that he will take our apartment, and a bunch of other not-nice things. That taught me a few things. After I got a great job and started living on my own, I had no troubles with those things. How awesome was the feeling that I can go to a supermarket and buy all the things I want. Getting big TV or newest PlayStation. Wow! In comparison to my previous life, that was a total luxury. My key in life is to make those things.... still being a luxury.

People still want more and more. This awesome car one buy now in 5 years can be "old crap". This awesome and big 60m² apartment can be a tiny prison after a few raises. My goal in life is never to think that way. I love my 60m² apartment. I love my 250€ bicycle. I love my 200€ tablet and 300€ laptop. Surely I could move to a bigger place, get professional bicycle or high-end electronic hardware. I can afford that. But I am happy with the things I have. When I bought those things, they were awesome. And I want to keep it that way.

And by the way... "young person's temptation to spend all the money you have". Use of "young" in this sentence is very right. Older people have temptation to spend *more* money than they have My friend bought a luxury car a few months ago, with borrowed from bank money. The car looks much nicer than their small house. They do not have such money, but they bought the car anyway.

PS: Does this post gives me a chance to win the book, or do I have to create a new topic? I want this book badly
 
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Nicely written, Adam! I liked your thoughts on this.
 
Campbell Ritchie
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Adam Scheller wrote:. . . Does this post gives me a chance to win the book, or do I have to create a new topic? I want this book badly

Only if you don't say you want the book badly

You have made interesting points about being satisfied with what you have, like the old English saying

Enough is as good as a feast.

Also recording your expenses. I suspect that simply having to record every penny/cent you spend will discipline you, because you will think, “She will notice the €2.99 I spent on coffee and ask why.”
 
Andrew Polansky
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We started recording every single cent because it is the way GnuCash works, our bookkeeping program. To record any transaction there must be always source and target account. When we buy groceries, it must have some money source that pays for it. It can be my wallet, wife's wallet, our bank account, my business bank account, and so on. When one picks ie. 50€ from ATM, there is -50€ on our bank account. This transaction must be recorded so we know what happened with those 50€. In such case, it's ie. transfer of 50€ from "Our Account" to "Adam's Wallet".

This way, we are able to track every single cent, making tracking of our expenses very accurate. Every week we check our wallets and accounts to see if values in GnuCash reflect real amount of money we have. When there are differences (bank accounts are not problem, but it's easy for mistake with wallet money), the one that made the mistake is paying the difference with own money. When there is too much in wallet, the surplus is moved to our jar with coins. When there is not enough, the missing money are taken from "pocket money". That indeed teaches discipline. Today, we barely have mistakes bigger than 1€.

Here you can take a look on our accounts in GnuCash:


And here is example report. We use those to analyze our spending at end of every month:



Thanks for the cow Karthik!
 
Campbell Ritchie
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Nice explanation, which explains how using that software applies discipline to your spending. As I said earlier, that will probably reduce your expenses significantly simply because you have to justify every cent spent.
 
Andrew Polansky
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Exactly Campbell. We started doing this tracking after we "lost" (spent on things we didn't really need) a quite significant amount of money within a period of few months. Small expenses look small and innocent, until they are summed up after some amount of time. Without tracking expenses one sees only small expenses, not the sum. With the tracking, every new expense is adding to the sum and the number grows with every new purchase. It's all clearly visible in the software. It gives something to think about before realizing a new purchase idea.
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