The Ignorant Affluent

I have been reading quite a bit of financial books lately.

Most of them are pretty much in agreement. They have the same types of advice (bascially) and then they add their personal touch.



For example, almost every book says the following:

• Save a percentage of your income.
• Give a portion of your income to charity.
• Live on the rest.
• If you get a raise, don't change your lifestyle - save the extra.
• Avoid unsecured consumer debt (credit cards).

The percentages differ, but the basic advice is the same.

Then there are a few that say to live beyond your means - stretch yourself and just keep making more and more to fund your lifestyle. Don't worry about debt. Debt is not bad.

To me, that is foolish. Debt (while not always bad) always incurs interest charges. Always.

Wouldn't it better to keep your same lifestyle (once you are making much more money), but then fund any "toys" or other expenses by saving and paying cash?

I remember some friends of mine who were making a great living in an MLM company. They had actually been doing well for a while, but then they started buying stuff on credit (funded by the MLM money). They figured that they were being smart - maintaining a certain level of income for 12-24 months before buying on credit.

Then the MLM went under. You can guess what happened next.

When someone has a six-figure income - and they live a six-figure lifestyle - and something happens to the income, you have a problem.

You cannot take a lower-paying job, because you have debt and obligations.

You may not be able to find a job paying the same amount.

Have a business? Sometimes sales come in cycles.

So what can you do?

When you are making more and more money with your IM biz - wait.

Save. Buy with cash.

Want a new house? Save until you can put a hugs down payment on it, so the payments are manageable - even if you have a drop in income.

You hear about "saving for a rainy day" - and that is wise advice.

Immediate gratification is fun, but not prudent.