Rule #14 Live on one salary.

I'd like to live as a poor man with lots of money.  ~ Pablo Picasso

This post is mainly relevant for couples working towards saving or paying down debt. We live on only one salary when we have two coming in. If you are not part of a couple, I would still recommend living well below your means if you can.

So if you are following along, you've probably guessed that we are very aggressive savers. When we started our careers 14 years ago, we were living in a small one bedroom apartment. I was in Grad School TAing Undergraduate classes and Kim was working an entry level front line position at a Social Services Agency.  We werent making very much money but we were very happy.  Our lives were simple and we didn't define happiness by how much stuff we had.  Pretty much all of my TA income was going to servicing and paying down our Student debt, and we were living on Kim's small salary.  We have always believed in NOT living beyond our means, and believe certain types of debt are anchors that weigh you down, so becoming debt free was a priority for us.  By the time I was done Graduate School in 2002 and had only worked about 3 years, we had tackled $58000 in joint student debt and were debt free.  I had entered my "adult" career phase and began making a fairly decent salary in 2002.  After out debt was paid off, we began saving every dollar of my take home pay.  Its amazing how much you can save if you don't let the cost of your lifestyle creep up as your income goes up.  We were still living a lifestyle that was paid for with only one salary.

We were informed that our apartment was being turned into condos so we were required to move, so we bought a house in 2002.  It was a very modest house on a very walkable inner city neighbourhood.  It seemed expensive at the time, but today it would be a screaming bargain.  Even though we could have "afforded" to take on a car loan, we chose to do without a car for another 4 years until we had saved enough to pay for it in cash.  My employer paid well so we began living solely on my salary and banked Kim's.  I worked in a boom-bust industry so while I was employed at the time, there was no guarantee that I would always have work, so we established a general rule that when both of us were working, we lived on only one salary and we saved the other, just in case one of us found ourselves without work or income.  We've done that every year since about 2002 unless Kim or I were taking some time off from working either for a Parental Leave or a personal Leave of Absense.  There was never a need to change our lifestyle since we were accumstomed to living on only one salary.  Easy Peasy.  The other great thing that happened is that as we saved and bought cash-flow producing assets, those assets began providing us income as well.  That investment income started small, but over time has compounded to a meaningful amount of income.  Its not easy to live this way if you are accustomed to a high consumption lifestyle, so it wont work if you aren't prepared to make sacrifices now.  If you haven't began keeping up with the Joneses, don't start.  

This "Live on one salary" strategy obviously works when you, as a couple, have two good sources of income.  If you don't have two good sources of pay, then getting two good source of pay is probably a bigger priority.  Once you are at that point, imagine how quickly you could amass a large nest egg if you as a couple saved half of what you brought home. To this day, we bank/invest about 40% of our joint net take-home income. We do not live lavish lifestyles so there is no shock to the system when either Kim or I, or both, are not employed. Since we've been living this way for about a decade, we have built up a substantial financial base as a cushion and we maintain a lifestyle that is somewhat modest compared to others in our age and income cohorts.

I've heard a lot of people say that they couldn't live on just one salary.   I believe most people can do whatever they set out to do, and that most couples choose to live on both salaries.  They have adjusted their consumption and lifestyle level to their joint income level which leaves very little wiggle room if one of the earners loses a job or wants to do something else like go back to school, or start up a business.  You are now trapped in the "I must work to sustain my lifestyle" vortex.  This is fine if it works for you, but don't use it as a crutch for why you can't save.

Rule #13 Take Accountability. Stop Whining! Go Read a Book already.

"You will get what you want, when you stop making

excuses on why you don’t have it."  - Unknown

Rule 13 is part rant, part rule.

A lot of people are lazy about money. They'd rather watch The Simpsons or Mad Men than figure out a way to make their lives better.  Thats fine with me but there is one nagging thing that I can't stand about many of these folks.... I've had it with their whining!  "My life is lousy, I can't get ahead, The Man is keeping me down, There is no way out!"  This is pure bullshit.  There are many things most people can do, but will they actually do it?  In many cases, no.

Jim Rohn is credited with saying "Poor people have big TVs, Rich people have big Libraries." I love this saying. I think it epitomizes a major problem in society these days.  Its not that people don't know what to do with their money to make their lives better, its that the don't want to know, and that they would rather spend their free time doing things that rot their brain instead of making their life better through gaining knowledge.  There are plenty of free resources on the web or at the library to educate ones self in basic money management or investing, but the it seems people don't seek them out.  My iPod is full of e-books and audiobooks on economics, time management, and finances.  Its also full of more light-hearted stuff just so you know.  I think part of this attitude is due to the fact that many people do not want to make the sacrifices needed to get ahead, so the bury their head or make excuses for not opening a book or asking for help.  Financial Success does not come quickly and generally does not come easily.  It also doesn't happen if you lack the knowledge and rely on dumb luck to help you make it through life.  80% of North American millionaires are self-made, and they got there because of knowledge, and hard work, not because they are any more special than you or I, or because they had rich parents.  They didn't buy into the mantra that someone else should make their life better.  They had the ambition to learn what it took and then went for it.

I'm not suggesting you need to manage your investments yourself or go start a business, or that you shouldnt get help to set up a proper portfolio or debt management plan, just that you need to be engaged with your own money and take steps to make your life better financially.  There is loads and loads of free knowledge out there waiting for you to learn it.  If you need help learning something, ask for help.  If you don't understand what company stock is, Google it.  Don't just sit there saying "My financial IQ sucks so I am screwed!"

Here are some books I recommend if you are looking to get acquainted with saving and investing money, or understanding how the economy works:
Stop Working by Derek Foster
The Cashflow Quadrant by Robert Kiyosaki
The Millionaire Next Door by Thomas Stanley and William Danko
Naked Economics by Charles Wheelan and Burton Malkiel

None of the books are a financial silver bullet, but they will get you thinking about money, if you aren't already doing that, its a good start.  I like all of these books because they are easy to read and they take the jargon out of finances, economics and investing.  I have either found them at the library or borrowed them from friends for free.  I'd start with Stanley and Danko first if you are just starting to think about money.  Happy reading.