WHY ARE MONEY AND FOOD SO SIMILAR?
Listen up, crybabies: This isn’t your grandma’s house and I’m not going to bake you cookies and coddle you. A lot of your financial problems are caused by one person: you.
On average, millionaires invest 20 percent of their household income each year. Their wealth isn’t measured by the amount they make each year, but by how much they’ve saved and invested over time.
Frugality, quite simply, is about choosing the things you love enough to spend extravagantly on—and then cutting costs mercilessly on the things you don’t love.
Context Matters: you’re probably right when you think your friend can’t afford those $300 jeans. I’ve been trying to be less judgmental about this. I’m not always successful, but I now focus on the fact that the sticker price doesn’t matter—it’s the context around it. You want to buy a $1,000 bottle of wine? And you already saved $20,000 this year at age twenty-five? Great! But if your friends are going out four times a week on a $25,000 salary, I bet they’re not consciously spending. So although it’s fun to judge your friends, keep in mind that the context matters.
Buffett realized long ago that having money doesn’t require you to spend it and that the money you don’t spend can be invested.
Of course, like buying, renting isn’t best for everyone. It all depends on your individual situation. The easiest way to see if you should rent or buy is to use The New York Times’s excellent online calculator “Is It Better to Rent or Buy?” It will factor in maintenance, renovations, capital gains, the costs of buying and selling, inflation, and more. You can find it at www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html