The only thing stopping Americans from achieving financial independence is ignorance. The typical American consumer’s dream is to make it big in order to go out and acquire a fleat of material posessions. Americans for the most part have no idea how to key in on basic money managing skills in order to build wealth.

There is a stark difference in those who have a basic understanding of finances and those who don’t. Those who do can be assured of living comfortably with enough saved for retirement, while those who don’t will probably be forced to work way after retirement age.

We basically live in an age of credit. We all know countless people who don’t really have money, but who are living the “rich life” all with fake money. In fact, it’s becoming more and more common for people who look that they’ve stepped up the rung and made it, living in million dollar homes and driving fancy cars, but in reality are a step away from the streets. These people buy homes on 1% interest for over 50 years, barely taken into account that their low interest rates will eventually go up, and lease brand new cars every year on elaborate credit plans that they can’t really afford.

It’s this world of credit we live in which is very tempting to just jump on the bandwagon and join all our neighbors in doing the same. We may ask ourselves, if so-and-so can afford it, there must be a way that I can to. The reality, though, is that this style of living is very dangerous. To put it very bluntly, it’s the gate-way to bankruptcy.

The constant credit card applications we get in the mail all promising endless goodness are nothing more than an aggressive marketing scam to get you to spend more than you have to, and essentially behind your back, suddenly raise premiums and interest rates.

It’s not a fun world to be in debt. Debt slowly creeps on and before many people even realize what is happening, they’re seriously drowning. What once looked like a great credit card deal is now simply a service which punishes you for owing money. The credit card companies many times will penalize you more and more as your debt adds up and payments come late.

To combat the growing phenomenom of “living rich on credit” is financial independence. Financial independence is the diametric opposite of what was outlined above. Financial independece means spending less money than you earn, which includes living in a house you can afford, driving a car you can afford which you didn’t buy on credit, shopping in economically friendly ares and having a wholesome attitude- spending consciously, yet not being stingy- towards money.

Once you make sure to spend less than you earn you’re already on your way to financial independence. It’s that simple. It means saving money instead of spending every penny you earn because you have “a burning whole in your pocket.” Eventually- it will not happen overnight- wealth will be acquired. Just be patient and persistent, and before you know it- within a couple of short years- you will have a nice net worth saved up. The recommended advice for building up net worth is by saving 10% of your earnings and investing in stable guaranteed money growth bonds and securities.

The Millionaire Nex Door, a book by Thomas Stanley and William Danko, offers real insight as to where and how millionaires are formed. And believe it, most are not formed from a spout of overly generous luck they’ve suddenly had.

Is the definition of middle class moving up, down, or getting broader every day? In today’s economy the term is so vauge that unless it’s specified to some extent it really means nothing. In everyone’s head the term is completely different and I would say that it’s not even a matter of salaries going higher or lower, but rather a matter of left to right in terms of the differences. For example, while you might think that $150,000 salary a year is a lot, for someone living modestly who owns a home in LA or NY city, it’s really not that much.

Where it really makes a difference is what has come up with the new election campaign. We have every nominee speaking out about how they will help the middle class, yet how the presidential candidates define the term “middle class” is what will ultimately make the difference. Will someone making $100,000 and struggling to maintain a comfortable lifestyle in a cosmopolitan area be considered eligible for the tax breaks and all the other great promised benefits, or will they simply be placed in a higher tax bracket, ultimately even worse off?

WASHINGTON - Quick quiz: Which citizen belongs to the middle class?

Email:
ZIP / Postal Code:

Privacy Policy

_A factory worker making $60,000.

_A lawyer making $200,000.

_A single mother of two earning $19,000.

Answer: All three — and just about everyone else under the sun, according to the world of presidential campaign politics.

Right and left, the presidential hopefuls are casting themselves as champions of a middle class that they define according to their own convenience. We’re talking No Taxpayer Left Behind here.

In appealing to the common man and woman, they can abandon common sense.

Even Democrat John Edwards, noted for plain talk about plain old poverty, says the thrust of his proposals is for the “middle-class pillars of saving, work” and “regular families.”

These candidates are on to something. Americans love to think of themselves as middle class, and so it has become an elastic concept that draws in everyone between dirt poor and filthiest rich.

In the political calculus, it means this: The middle class is everyone who would be helped by my plan. And no one who would be hurt.

Republican Mitt Romney takes the middle class conceit probably the farthest, well into six figures.

“We’re going to have to reduce taxes on middle-income Americans immediately,” he says.

“Zero rate on middle class savings,” he says, “to make it easier for the middle class to save.”

An ode to little pink houses?

Not exactly. His tax plan says anyone with adjusted gross income under $200,000 — that’s after certain deductions — should be relieved of all taxes on capital gains, interest and dividends. Certainly $200,000 a year doesn’t buy what it used to. But it’s still easy street.

Romney and the others break no rules here, as much as they stretch credulity.

There’s no accepted standard of what constitutes the middle class, although it’s safe to say that the multimillionaire former Massachusetts governor and most others in the race are well above it in their own lives.

What’s left after the smell of brand new leather is gone from your new car? The answer could be that the only thing missing is a nice couple of thousand dollars. Cars are the one product that unless you’re talking about a classic, older does not mean higher value and a higher networth on your assets sheet. Laura Rowley, a financial advisor gives us the facts:

If the idea of saving thousands of dollars is more thrilling to you than that new-car smell, you’ll find your heart’s desire in the used car market. A wider pool of quality used cars, and progress in Internet search functionality, have vastly changed the buying experience.

In 2007, roughly one in four buyers of late-model used vehicles relied on an Internet vehicle locator or online classified ad service to find the auto they purchased. That’s a 44 percent jump over the previous year, according to a study by J.D. Power and Associates.

And there’s no beating the price. “People don’t think of depreciation as an out-of-pocket cost, but it is,” says Philip Reed, senior consumer advice editor at Edmunds.com and author of “Strategies for Smart Car Buyers.” “There’s a steep drop off in [value] in the first year, and 30 percent depreciation by the end of the third year.”

For example, Edmunds looked at the Lexus GS 430 and GS 450. “The first-year depreciation on the new car is $14,000; if you bought a two-year-old model, the depreciation is $3,000 in the first year of ownership,” says Reed.

Coupons are making a comeback in the year 2008. It’s no longer a badge of honor to say: “The time it takes me to cut out the coupons is totally not worth the price. My time is more expensive.” Yes, that’s all for the old days. These days it’s becoming a real fad to get bargains everywhere you go. You’d be really surprised- a few minutes can easily save you 20% on your next grocery shopping.

CouponMountain.com is one of the easiest sites to navigate because it is also one of the few that don’t require registration or a lengthy sign-up process in order to access coupons.

It features ready-to-use discounts for popular brands and stores such as Dell, Target, ToysRus, Office Depot and BestBuy. The site also offers discount codes for airfares, hotel reservations, car rentals, and online dating. And if you’re a fan of a specific store, you can subscribe for email notifications whenever special offers from that store are available.

For grocery savings, go to Coupons.com. According to independent research, it is now the leading consumer savings site on the Internet, with printable coupons for major household brands such as Johnson & Johnson, Unilever, Pepsi, General Mills, and Kraft. You can view available savings by category or by brand, print area-specific coupons by entering your zip code, and get an estimate of how much money they will save you.

Other Web sites for printable coupons include Dealcatcher.com, with up-to-date offers and a forum for users to post promotional codes; Currentcodes.com, where you can browse for savings by merchant as well as alphabetically; and FatWallet.com, which in addition to coupons allows you to search for sellers that offer cash back on certain purchases.

When you take the time and effort to do things yourself instead of being ripped off by a quasi-professional you accomplish three things: Save money, feel more confident and accomplished with yourself, and create another whole dynamic to yoursef. The truth is that anyone with the right tools and just a little bit of training can do anything. It all just depends on one thing: whether or not you believe in yourself.

Blow Dry Your Own Hair

This applies more to women- if you’re constantly paying over $30 just for a blowdry for every event that can add up to serious money over time. (especially if you’re in that friends’ weddings stage, or have many formal events to attend.) Buy a good blow dryer, a few clips to pin up your hair- and wallah- you’re set to go.

Just another tip which can also save you tons of money- Go to a beauty school to get your hair done. If you periodically dye your hair, relax it, or Japanese straighten it, this is probably the best idea. A Japanese straightening can come up to $800, and in a school it can be free. If you’re nervous about people messing up your hair, don’t worry, the schools won’t let that happen. The teacher will always redo the student’s job.

Fix Your Own Car

Learn more about the vehicle you own. Learn about all the oils and know which oil goes where and where your coolant goes. This way if you feel you need brake fuel, or whatever the case may be, you can walk into any hardware store, buy it and fill up the car yourself instead of paying someone else to do it.

Even if your car needs a repair that isn’t so minor, know about your car, so that when you do take it into the shop you can tell whether you’re being ripped off. Many times pipes and radiators can be welded instead of being replaced. Knowledge is power. Being a little knowledgable about your car can go a long way.

Dry Clean Your Own Clothing

How do I do this is probably the question you’re asking about this. Many times the solutions sold to put onto clothing stains actually do work. Use your judgement in deciding which clothes are worth taking to the cleaners- e.g. your tuxedo- and which ones are O.K. to do yourself.

Another tip- most dry clean clothes can be put into a washer with cold water and then hung to dry. If your washing machine does not have a setting which doesn’t wring out the clothing then take out the clothes a little bit early and hang them so they won’t be wrinkled.

Make Your Own Food

Even the fanciest foods always have simple recipes that can be made in your own kitchen. Grocery shopping is basically the key here. The difference in cost of buying your own raw ingredients instead of eating out is enormous. Just throw some rice or noodles into a pot, add some spices, serve it with vegetables, and you have a gourmet meal. It’s really not a big deal.

Keep a clean record.

Don’t break speed limits or drive recklessly. You’ll insurance will go through the roof.

Buy the insurance online

If you call the company they will often add 10%

Buy a car in a low insurance bracket.

Preferably something under a 1.6 liter engine and that isn’t stolen easily.

Keep your car in a secure place

You’ll get cheaper insurance this way

Third party insurance is not really worth getting.

For example, if you hit another car - your insurance will pay for their damages but not yours. Comprehensive cover makes more sense. You don’t want to be losing all the money you spent on it!

If you are paying monthly then make sure there is no interest.

There are few companies that charge 0% - find out what the cheap car insurance deals are.

Drive Less

Don’t drive a car when you don’t have to. Walk, take the bike, or take a bus. This also will help our environment and may be better for your health. Is it really necessary to drive to the store that is only a few blocks down the street?

Get a credit card

Some credit cards offer gas savings when you use the card for purchases. But watch for interest rate charges. Also check whether the station charges a higher rate for using a credit card to see if it’s worth it.

Get a new air filter

More efficient brands of air filters will pay for themselves in most vehicles in fuel savings.

Get Low Resistance Tires

There are tires, such as Michelin Energy MX 4 Plus, which are supposed to increase gas mileage.

Get a membership card

Some gas stations offer membership benefits. Make sure you understand the benefits; getting a 10-cent discount on gas that consistently costs 20 cents more than the next guy doens’t save much money.

Give your car a tune up

Properly maintaining your car won’t save you money at the pump, it will save you gas. Using less gas saves you money. Have the oil changed, and have a certified mechanic give your car a check-up. Better maintained cars are more fuel efficient.

It is commonly said that housing needs shouldn’t take up more than one third of a person’s income. While this in principle should be true, many people with hindsight are paying even more than the recommended percentage. 33% may be the average recommended percentage, but ideally, for someone who really wants to enjoy life the above advice is way too old fashioned. Who wants to spend their life in debt to the bank- which is essentiall what most home ownership is about- for a longer time than necessary?

The trick to getting out of a life-time of mortgage payments and to really enjoy your life without the number one
most annoying bill of the month is to pay off your mortgage early. Paying off your mortgage earlier can mean a saving of tens of thousands of dollars in the long run. Remember, the longer you pay, the more interest you will pay.

ThisIsMoney explains why you should overpay.

Say you have a £100,000 mortgage taken out over a 25-year period, with an interest rate of 6%. Overpaying by £100 a month could save you a healthy £27,039.37 and knock more than six years off the life of your mortgage. (Use This is Money’s calculators)

However, with some lenders there is a minimum amount you are allowed to overpay. If you pay in less than this, your money sits in the lender’s coffers until the end of its financial year, which means you are giving it an interest-free loan.

If you pay more than the minimum, your interest bills will be recalculated from the following month.

Some firms offer flexible or ‘offset’ mortgages that recalculate your balance daily. The effect is to help you get rid of your loan even faster and people can take advantage of this by paying extra every month.

Many High Street lenders have given normal loans flexible features, although some set minimum or maximum amounts you can overpay.

The 2000 study by Ventis and Wises title, “Choice, Chance, and Wealth Dispersion at Retirement,” revealed a wide range in how much people at the same income level were able to save for retirement. The study proved that how much people saved had nothing to do with the amount they earned. In fact, some people in the lowest income groups were able to save $100,000 more than people in higher income level groups.

The conclusion of the study was that people who chose to save more money and spend less throughout their lifetime, regardless of their income level, had more money for retirement. Tahira Hira, a professor of personal finance at Iowa State University who has spent more than 25 years studying people’s spending habits, agrees with this conclusion and offers her own tips.

Hold the mother of all garage sales.

Cast a critical eye on the stuff at the way back of your closets. If you haven’t used it in six months, chances are you can do without. Same goes for all that junk in storage. (See “The hidden costs of too much stuff.” ) Annual savings? Depends on how much junk you have, of course, but one coworker guessed he had at least $5,000 worth of stuff he could get rid of. I’d put my own garage sale potential down at around $1,000. Thats a good number.

Quit smoking

Pack-a-day habit? In Washington state, that’s easily $5 a day — or about $1,800 a year — that can go right into your savings, not to mention what it saves you on insurance and health care.

Tame your driving addiction

In other words, carpool or use public transportation. This saves on gas, insurance and maintenance costs — not to mention any money spent on aspirin. Using the IRS’s 2002 mileage reimbursement rate of 36.5 cents per mile as a proxy for the cost of commuting, you could save $1,141 a year by driving half the time for 50 weeks a year (based on a 25-mile roundtrip commute). For an even more drastic approach, consider getting rid of your car if you live in the city. Some cities are now implementing progressive programs that allow you to have access to a car without the ownership hassles (e.g. “Flexcar” in Seattle, Portland and Washington, D.C. For more on Flexcar, see link at left.)

Buy used.

The average consumer spends about $1,750 a year on clothing and its upkeep, according to the U.S. Bureau of Labor Statistics’ most recent Consumer Expenditure Survey. You can potentially cut that in half by shopping at consignment shops and auctions, though the life of the goods may be less than buying new. To account for that, the annual savings may only amount to 25%, or $437.

Become a homebody.

At just over $1,800 a year on average, entertainment spending has a way of quickly eating through the best-planned budgets. Consider the library for books, music and movies. Eat out less often. The average person spent $2,276 a year on eating out in 2002. Try cutting your spending in half on both areas for annual savings more than $1,900.

Cut your housing expenses.

While a move across the tracks may save some money, moves are expensive in themselves. Consider renting out a room. The average housing costs per person in 2000 were just over $13,200. In metropolitan areas such as Seattle, rooms easily go for $400 a month. Figure about $20 of that goes to increases in utility costs, and you’ve still got an annual savings of more than $4,000 before any income taxes.

Cut up your credit cards.

Build an emergency fund first to handle most unexpected expenses. This allows you to become your own lending agency. (OK, if you’re chicken, try cutting up all but one.) Credit cards can be a cash-flow management tool, but paying only the minimum will keep you in debt for years. If you’re the average American with at least one credit card, you probably have close to $8,523 in credit card debt, according to industry research group CardWeb.com. At an average APR of 14.4%, it could cost you as much as $1,100 a year in interest alone. By simply waiting until you’ve saved enough money to make purchases, you could eliminate those interest payments entirely.

If you’re really are committed and follow all the above tips, you could be saving nearly $12,000 a year. Sounds pretty cool, huh?

This can be greatly helpful in avoiding the impulsive and silly purchases of things you hardly ever use. Before you buy something, especially with expensive items, rent one, borrow one, or try one out before you purchase. This way you will kow if you are not satisfied with it, or determine that it really is not something you needed before you buy it.

Example: You feel that you absolutely must have a new motor scooter, at a cost of $4500 (and that is before financing and taxes). You go to the bike path, rent one, and 45 minutes into a one hour rental you are saying, “gee, this is a long hour.” Saved: More than $4500.