How You Can Join The $1 Million Club
The reason a lot of people don’t join the millionaire club is because they live beyond their means. Instead of gradually increasing their lifestyle with their income people tend to live a lavish lifestyle and hope their income catches up. If you get a raise you should plan on banking half you raise in investments and spending the rest. This will allow you to increase you standard of living with your raises and bonuses instead of spending it all at once.
• Live large, just not in a big house. The standard rule of thumb for how much house you can afford is 28% of gross monthly income.
But who says you have to spend all 28%? Using this rule, a person making $80,000 could afford a $1,900 mortgage. Based on a 30-year loan at 4.25%, that puts the price at around $375,000. But if you dialed that back to 23% of income, you’d lower your payment to $1,500. Invest the savings at a modest 5%, and you’d have an added $333,000 over the life of the loan.
The quote above of course does not include the money required for the 10% down payment which you have to get by saving. If you are spending more than 35% of your income on your apartment or mortgage this is an indication you are living beyond your means. The last tip that includes saving is spending money on experiences rather than products. By investing in a vacation rather than a new car or new clothes people are generally much more satisfied for longer. This means you save more money down the line.
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.