HSRNT CRSS-CDS 080308

///////////////////You are never too old to set another goal or to dream a new dream. -- C.S. Lewis


//////////////////Spend less. Spending money usually takes time and effort away from making money. It can substantially weaken your power base if you squander your financial resources and leave yourself dependent


/////////////////////Spend LessIn the second section, Bach offers some pretty straightforward advice on spending less and reducing debt. Unsurprisingly (for anyone who has read other Bach books), he leads off with the “latte factor” (calling it the “double latte factor”, but it’s the same idea). For those uninitiated, the “latte factor” refers to the idea that over the long haul, you can save a lot of money if you cut out very small routine expenses from your life - like a daily latte at Starbucks, for example. Using the repetitiveness of a $4 latte, if you were to buy one every weekday for a year, you would have spent $1,040 on lattes in a year. If you take that $1,040 and put it somewhere where it earns 7% a year (say, a retirement account), you’ll have just shy of $100,000 after thirty years. Obviously, not everyone overspends on lattes, but everyone does have something that they spend a little more than they should on routinely. I had a whole pile of “latte factors” before my financial meltdown… in fact, I’ll be talking about this later today.
Bach also addresses credit card debt - basically, that credit card debt will eat you alive, but it’s not because of the amount you owe. You’ll be eaten alive by the interest (and possible late fees). You do have some leverage, though - so many companies are in this business that they’re cutthroat with each other, thus it’s not too hard to talk a credit card company into reducing your interest rate to keep you as a customer.
Two other good suggestions: don’t devote all of your resources to debt elimination if you’re this late in the game, and also don’t use credit counseling services for things that you can figure out yourself (and most consumer debt situations can be figured out on your own with some time and care).


////////////////////Save MoreThere’s really two principles in this section.
First, make your investing and savings automatic. This is the big principle behind Bach’s book The Automatic Millionaire. Simply put, instruct your bank to directly sock some money away for you in an investment or savings account. That way, that money isn’t even there in your checking account to tempt you into spending it. I agree wholeheartedly with this idea - it’s a big part of how I manage my own money.
Second, buy a house. Even in today’s terrible housing market, this still makes a lot of sense over the long haul because you’ll wind up holding an asset rather than putting money in someone else’s pocket. My feeling is, though, that many people in Bach’s audience already do own their own home (or are close to it).


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