Tuesday, August 26, 2008

Good Advice

I finished reading a book called Confessions of a Subprime Lender about the credit crisis in the US. What struck me was the stories about how many people were living beyond their means, barely getting approved for mortgages, then being forced out when their adjustable rate mortgages adjusted up.

It reminded me of some advice I got a few years ago from a family friend about living within your means. Specifically, he talked about how many people that he worked with in a seasonal, construction type industry depended on their bonuses as part of their income. He on the other hand did rather well treating his bonuses as just that bonuses. He lived on his income, and then used his bonus as an investment.

It also speaks to the greater topic of found money, ie bonuses, tax returns and inheritances. More good advice, park found money in an investment account, wait and decide, rather than spending a new found windfall. Certainly pay yourself, spend 10% on yourself, but invest the rest or pay down debt.

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