By JLP | January 21, 2007
I have been thinking about our personal finances lately (well, all the time). I noticed recently that our household net worth has doubled over the last couple of years, which is pretty impressive in my book. I started thinking about what caused this growth. I can think of a few things:
1. Good bonuses
2. Excellent 401(k) growth along with good contributions
3. Pay raises
4. Getting rid of our credit card debt
and most important:
5. NOT increasing our lifestyle
All of these combined were the ingredients in the growth of our net worth but I think the real key was number 5: NOT increasing our lifestyle. This wasn’t always possible. When we were younger, pretty much everything we did was an increase in our lifestyle. Now that we are in our mid (to late) 30s, we have the house, the cars, and the other stuff that we had to purchase when we were younger. Now we are basically coasting along and so every raise and every bonus can be used to increase our net worth instead of increasing our lifestyle. That’s not to say that we wouldn’t like a nicer house in the future or a nicer car to replace our 9-year old Honda Civic.
The point of all this? Well, if you are young and just graduating from college, think long and hard before you go out and buy that fancy car or rent that expensive apartment. Instead, concentrate on setting up your emergency fund, getting started in your 401(k), paying off credit cards, and buying a house. And finally, RESIST the temptation to spend those raises and bonuses. Then 10 – 15 years down the road, you’ll be most happy!
Here are some other posts related to this topic: