Wednesday, March 21, 2012

Review of How to Afford Anything

I stumbled upon a great article of Ken Rockwell called How to Afford Anything. Since the article is quite long, here are the points that helped me the most, i.e. were the least obvious to me.

Priorization
In short - buy things that you really want. Don't buy things just because it is so easy.

Never buy a new car - as it is one of the worst investments. New car losts a notable value just by you buying it.

Don't buy a big house - instead, try to live just below your means. Why? Because then you will always have more money than you need. This can be abstracted to the rule - try to spend just below what you have, e.g. the 99% and you won't know what to do with the money. The problems raise if you spend just a little above, e.g. 101%.

Real estates not always make you money - you pay lots of things around the house. So buy the apartment only if you intend to live in there.

Patience
Find plenty of time to research products that you intend to buy.

Thrift
"A luxury, once sampled, becomes a neccesity." Don't borrow or even try fancy stuff. You will think you deserve it and you will eventually have to buy it.

Don't take loans - buy only things you could afford. It takes simple math to calculate that all debts cannot be payed. If there were just one person (or 7 billion) and a bank (or a thousand banks) and the bank would borrow 100 dollars to the person and wanted back 110 dollars, but the only place to get money was the bank, the person has no chance to pay his debt.

Don't rent apartment - rent just a room. The rent money is money thrown away. If you must rent, do it just with one room, as it is all you need untill you have enough money for mortrage.

Embarrasment
Ask for a Deal - always when you can. Read a book about deal negotiation.

Return what you don't want or need.


Addiction
Don't go into the stocks market. This is a nonsense in the long-term.

No comments: