I have to disagree with the premise and the following statement "don't spend (or invest) money you don't have."
The average home costs $170k in the US. Should someone not buy a home because they don't have 170k in cash?
Should a high school graduate forgo college because he doesn't have 30k for tuition & books?
Should you forgo medical treatment (even though you might die) because you don't have 10k for medical treatment?
The whole "don't spend money you don't have" sounds pretty stupid when you start putting things into context.
The short answer to this person is yes, and while his comment saying that the idea of not spending more then you have is stupid, is in fact well stupid. However, the poster is using the mindset of most Americans. Americans who will never be wealthy, because they want everything now, rather then following the advice of those who actually have money, like Warren buffet, Dave Ramsey or John Cummuta.
The key is to save for those big purchases, such as a house. John Cummuta even suggests you may have to borrow to buy your first house. However, what you do is buy a smaller house (a starter house) save up money as you pay off that house, then when the time comes to move into a $170k + house, you pay cash for it. The thing is when you borrow to pay for anything, you end up paying much more for it. For example over the course of 30 years you will end up paying the bank a half million dollars for that 170k house. How stupid is that? Why not save the money up and pay less. That is in fact how rich get rich and the richer get richer.
Take a look at Donald Trump, a great businessman, but a poor example of wealth building. How many times has he filed bankruptcy now?
Now for education, this is a common problem, but if a student graduating high school had truly wise and prudent parents, then they would have money saved up for their kids education. Dave Ramsey tells a story about a couple who had a few thousand saved for their first kids education. Now she was pregnant with a 2ND child and wondering how they were going to pay for the education of that 2ND child, who wasn't even born yet. Dave didn't have an answer, probably only be able to pay half of each child's education. That wasn't good enough for this couple, they returned to Dave a few months later and reported that the young father (a school teacher) had gotten a 2ND job over the previous few months, delivering pizza, to earn enough money to fund the newborn education.
These parents were wise, and they thought ahead enough, to even get a 2ND job, to make sure their kids future was met. So Mr. Rich Slick, if you want to really have enough money to be a "rich slick" then you will save rather then borrow and live within your means.
In fact the graph on this post (from 1st Tennessee) shows how much more a borrower will spend on education then a person who had saved. Rich Slick is that what you want for your kids? Sorry, but I want to provide better for my kids future then that.
this article has made it's way into other blogs. Mandy commented on D's post
I guess you mean to take the advice with a grain of salt. Aim high. Some people feel that if there's a loan on offer for 95% of the purchasing price, they should take it. Or if they can get student loans for their kids' entire education, they should go for it.It has also made it's way to GetRichSlick.
I think the aim should be to have as much of your own cash as possible. Get the smaller house if needs be, and pay it off earlier. Then it's an asset.
Plan for your kids' education instead of letting it sneak up on you (and them). If you have something to contribute, the debt incurred will be significantly less.
To me, it's all about an attitude adjustment from the "I want it all now" to "I want what is possible without huge debt"
