Cash Flow CPR

[DigitalWarrior]

Step 1:  Make sure you have a grand in the bank that you do not plan to spend.  If you do not have it, get it.  Live like a monk, sell your possessions, take any work that you are able to.  A grand is the difference between a car repair becoming a dire emergency and an inconvenience.  A grand will buy a cheap car or a room to lay your head for a month in a real pinch.  If you do not have a grand, and your friends are not questioning your very sanity, you are not doing it right.

Step 2: Now that you have a grand, use the 60/20/20 rule.  Sixty percent of your income can be used for living expenses (in the neighborhood of 30% housing, 10% food, 10% car, 10% extras/fun is a usual split.)  20% for the payment of debt.  20% to savings.  As soon as you are debt free, you shift that money into savings.  Until you have three months salary saved, you stay at this step. 

Step 3: Once you have three months savings, it is time to start saving for the medium term.  The 20-40% savings should be put into a form that has a higher interest rate and you will not be punished heavily for withdrawing from, but will take a couple of days to "get to".  You stay here until you have another three months saved.

Step 4: It has likely been more than a year (and never more than three years) since you started your journey.  You can withstand layoffs and financial emergencies.  You should now visit a financial planner.  They will take you towards wealth.

Inspired by "The Millionaire Next Door", the financial counseling for US Marines course and several articles I have read.

[DigitalWarrior]

Turns out that changing the subject creates a new thread...

[Coconut]

Well I can skip 1 and 2 since I'm already past the goals those are made to achieve.

My problem is I don't like my bank account number going down. Whether the money went to Gold, my retirement account, or something else. Of course I know it's still my money. It's just the initiative to get up and do something constructive with it is lacking.

[William]

If you're in NH you can switch that grand in the bank to one gold coin in your pocket.

[Friday]

If you're in NH you can switch that grand in the bank to one gold coin in your pocket.

What, we've got a monopoly on gold coins now?  Sweet!! 

[K. Darien Freeheart]

Turns out that changing the subject creates a new thread...

No, I'm a "stay on topic Nazi" and I split it. I was posting to say "I split this" but I always ended it with some exclusive rebuttal, and I wanted time to really do some thinking before replying.

[DigitalWarrior]

I would argue that I can not easily exchange one gold coin for a new transmission, so it does not meet my needs for an "oh shit fund".  You might make the argument that saving your second three months of money in gold makes sense because you can convert it to FRNs in a few days, but I am not a big fan of putting savings into commodities when it could be bearing interest.

[error]

I would argue that I can not easily exchange one gold coin for a new transmission, so it does not meet my needs for an "oh shit fund".  You might make the argument that saving your second three months of money in gold makes sense because you can convert it to FRNs in a few days, but I am not a big fan of putting savings into commodities when it could be bearing interest.

Interest which is less than the rate of inflation? Sounds like a loser to me.

[John Edward Mercier]

Depends on the interest bearing certificate. If you invested in foreign currency-based bonds, not only did you get interest... but protection against the devaluing dollar. Lots of options.

[error]

Foreign currency investment is just a short-term solution. It's going to be hard to find a foreign currency to invest in that won't also go when the dollar goes.

[John Edward Mercier]

Commodities including currencies are relative.
I'm expecting a great deal of deflation within the next several decades.

[William]

Commodities including currencies are relative.
I'm expecting a great deal of deflation within the next several decades.

Do you really think there will be a US dollar for another 4 decades?

[John Edward Mercier]

I don't know... are there still Confederate Dollars?
And those were made of paper, and worth more than face value today.

[John Edward Mercier]

Not to be mean... but I did state currencies. The US dollar is just one.
I expect deflation in real terms due to demographics. The Boomers create a demand bubble... as they age it increases certain areas of the economy then leaves excess supply for the incoming generation.