Thursday, March 10, 2011
The Money Class: I Guess the Rules have Changed
I guess some of the finance rules have changed. Suze Orman has written a new book, The Money Class. One of the big changes is that she now says that it is okay to rent, where her previous advice was to make sure you buy a home as property was the best investment you could make.
Now keep in mind that most of her advice is for Americans, who are in a different set of economic circumstances than Canadians. But I do like her Top 4 Financial Tips.
1. Live below your means, but within your needs.
-If you can afford to buy a $800,000 house, then buy a $550, 000 house. You don't need to always have the best of everything.
2. The pleasure of saving should =equal= the pleasure of spending.
-This is a new mindset that people need to get into. Not everyone feels this way, but it is much more sustainable. No more retail therapy, now we need saving therapy. Can you get the same joy out of purchasing an RSP as you do a car?
3. If you are underwater in your house-->keep plugging away to pay it off.
-Now this is more applicable to Americans, but it is happening right now on a smaller scale in Canada. Basically she is saying that even if your house is worth less than you paid for it, this is where you live and you need a roof over your head. Keep plugging away at your mortgage payments because you will eventually build equity.
4. Focus on what will be gained, not lost.
-Don't focus on the spa visits you can't have, the new car you can't buy, and the latest fashions you won't be able to get. Rather, focus on your increased savings and your peace of mind of not having financial burdens.
In a hot economy, it was easy to get caught up in the spending mentality...but now things have to change. Being fiscally conservative wins the race!