When we got married, we had a negative net worth. Lots of student loans. We got jobs and worked pretty steadily. I was out of work for two or three years between then and now. She’s been out of work for a year. She always made a good deal more than I did, but we both believed in saving money, and so we funded our 401Ks and all the other tax advantaged savings vehicles that we could afford, plus we saved after tax money.
We never spent much. At least, not early on. We took cheap vacations. We didn’t buy furniture or fancy electronic equipment. What we did buy, we used for a long time. We bought small, inexpensive cars and drove them until they got stolen or totaled in accidents. We only had one car, and we didn’t use it much because we used bikes or public transport to get to work.
We tried to be efficient in our energy and water use, but there are some things we should have done twenty years ago that we are only getting to now, like insulating the house. That might save us a thousand dollars a year. We hope. We’ll see.
So we’ve paid off the house, and now we’re getting prepared for college. That means spending our after tax money on the house, so that we look poor. Also, since my wife isn’t working, our income is much much lower than it was. All our assets are untouchable. We won’t have much money while the kids are in college, but hopefully we will have enough when we retire.
The book that got me started was Jane Bryant Quinn’s book. She tells you what to save and how to save (invest) and what insurance to buy and all kinds of other things. There may be better books now, but I don’t think financial wisdom changes much, except that people urge you to be more conservative in your expectations about the growth of investments now.
You are in a tough place if you have little income. But if you can, you look for ways to scrimp and save. Can you spend less on your home, somehow? Less on electricity? Less on a vehicle? You look for ideas for each of these items. Everything you save, you save. You don’t spend. You want to build up enough money to live on. First you want enough to survive for six months with no income. Then for a year. Then two. Etc.
You are systematic about it. You do your research. You analyze your situation, and you find ways to manage money. You do it one step at a time. You do one thing first. Then look at something else. Obviously it’s best if you do a high value item first, like maybe getting a job, but it doesn’t matter, so long as you do something. Like eliminating the need for a car. Something. Anything.
Fear is an excuse to do nothing. But there’s no reason to do nothing. And when you build up a nest egg, you can do nothing. But not now. It is possible to start from deep in the hole and end up with a nice net worth. I’m sure we could have had a much fancier life, if we chose to. But then we would not have peace of mind, knowing that if things go bad for a few years, we will be able to weather the storm. Of course, if things go really bad, that’s another story. But that’s something no one can prepare for.