There are many sites on the Internet that tell you that being financially secure means you have to save up heaps and cut your costs. This is all fairly obvious. Many of these sites offer many creative ideas on how to lower expenses, such as reusing old newspapers as Christmas wrapping paper. A lot of these thrift sites seem to promote a simple life (no relation to the Paris Hilton show) consisting of serene and harmonious things like meditation and reusing clothes. However, achieving financial security and achieving it fast, in my opinion, is not as serene and happy as these thrift gurus pretend it is. I will list below some proven behavioral changes you will need to make to achieve financial security fast. These points I make here tend to be mistakes that most people make on their quest for financial security
1. Don't Have Children
Depending on whether you want to pamper your child or deprive her (e.g. send her to an elite private school or just dump her in some government school) an extra child will cost you from $250,000 to $1,000,000 throughout your life. Many people might think, "Aww, but I love children! They're so cute!" This is understandable as humans evolved to propagate their genes and evolution has preserved within us a desire for children to encourage us to propagate our genes. In other words, we were made to make children. Since we were made to make children, we have to do it, right? Not necessarily. The average person's thirst for children can be quenched at a lower cost. I call this concept finding a low cost substitute. Let me move from children and talk about something else so that I can make an analogy. I will talk about cars. Unless you live right next to work, everyone needs a car to travel. However, why buy a Ferrari F430 for $250,000 when you can buy a Toyota Camry for $30,000? Substitute the expensive Ferrari for the lower cost Camry and save money. The same concept applies to children. Instead of producing your own children, derive pleasure from other people's children. E.g. find another couple that has a child and simply pretend that their child is your child. This will feed your biological desire for nurturing or protecting or whatever at a lower cost. Because you can easily switch from one child to another, this technique also benefits from financial diversification. If you invest only in BHP shares and BHP share prices nosedive the next day, you've lost everything. However, if you don't put all your eggs in one basket and instead buy shares in BHP and, say, ABC, then if your BHP investment stuffs up then you still have ABC shares that may do well. Applying this concept to children, if you pretend that the Joneses' child is yours and if the Joneses' child later turns out to be really evil (e.g. his favorite hobby is smearing his feces on the wall) then simply walk out and go to the Changs' child. Satiating your desire for children by pretending that other people's children are your children is a good idea, but a better idea is to start your own childcare centre. Either run one yourself if you have nothing better to do or at least own one and get someone else to manage it. This way you get a huge pool of children and it will seem like you have a really huge family. Plus you'll be earning money.
2. Live With Mommy and Daddy
Consider moving out of your parents home only when they pass away. For most people this means moving out at about 40. The benefits of living with your parents are obvious. If your parents are nice enough, and most are, then they will give you free accomodation, free food, free water, free gas, free electricity, free broadband connection, free phone line, and many other free goodies. They will pretty much cover all your living expenses so that you can direct all the money you earn into your investments.
There are usually exceptions to rules, and there are many exceptions here. Suppose you live in Australia and you get a job in America or Japan. Then you have no choice but to move out of your parents home. But even if you get a job in the city and your parents' home is all the way in the suburbs, you might want to consider renting or buying an apartment in the city if the cost of commuting everyday is too high. This will all depend on individual circumstances.
I should also mention the negatives. Living with your parents may not be a good idea if your parents are just bad parents. For example, maybe the food they are serving you is too fatty and unhealthy. In the long run this might inflate your medical bills. You also have to be wary of any resentment your parents might have. If you stay for too long they might think you're exploiting them. To fix this you will need to apply some marketing skills. Many parents produce offspring because they want to nurture and protect a child, but if you become an adult and start acting too much like an adult then they can't do these things. Perhaps by acting a little bit like a child you can earn more love from your parents. But perhaps not. As the wise Aristotle said, "Bashfulness is an ornament on children, but a reproach to old age." In other words, a kid actings like a kid is cute, but an adult acting like a kid is just sad. Use your own discretion.
Another problem I find with living with parents is that it is just too comfortable. Basically, if you're in the city, everyone around you is running around and getting things done. People on the streets are honking their horns and screaming, eager to get somewhere to get something done. This sort of environment and atmosphere heightens your concentration and increases your productivity. However, if you commute from the city to the peaceful suburbs and come home to a nice fine meal and sit on the sofa to watch another episode of the Simpsons then that high-productivity atmosphere and environment vanishes. You'll want to laze around, sleep in all day, do the gardening, and spy on the neighbours. Basically, you get nothing done.
3. Drive a Second-Hand Car
Never ever buy a new car. Many people say, "I can afford it, so I'll do it!" It doesn't matter if you have enough money to buy it because the cheaper you car is the more you can put into your investments. Ideally if you want to achieve financial security fast you need to put into your investments as much as possible as quickly as possible.
What is wrong with a new car? The reason why a new car is a financial deathtrap is because of its rate of depreciation. After you drive your new car out from the show room, about $3000 or so of its value will vanish into thin air and from then it will rapidly depreciate because dealers are constantly cutting the costs of their new cars to clear inventory. The best things to do is to buy a second-hand car. I always look for a car that's about AU$5000 to AU$7000. It'll usually be about ten years old. Many people think that because I buy ten-year-old cars I am getting a crappy bombs that will break down the minute I touch them. The reality is that if you choose wisely and have your second-hand car inspected by a third-party mechanic (e.g. RACV) it will likely run just as well as a new car.
Many people in the market for second-hand cars look around, notice that cars like Toyotas are more expensive than prestige cars like Mercedes, and then think, "Well, if I can buy a Toyota for about the same price as a Merc then why not just get a Merc?" They want the snob value for low cost. I have noticed this around and I think it is because many years ago Mercedes decided to cut costs to increase profits and as a result their quality suffered big time. Toyota, on the other hand, is usually consistent in terms of car quality according to the JD Power and Asociates survey, and so most customers may feel comfortable buying second-hand Toyotas. Furthermore, common cars like Toyotas tend to have cheaper parts whereas exotic cars like a Mercedes CLS will need expensive imported parts. Cost of repairs of prestige cars will usually be high as well.
Before I spoke about not having children. Buying a second-hand car is a lot like not having children. A car is just a like a child. They can be lovely and you can be proud of them. There are also downsides. They can be unreliable, they can be noisy, they are expensive, you have to wash them, you have to maintain them, you have to repair them, and as they get old their value drops (i.e. they depreciate). Earlier I recommended not having a child and instead enjoying other people's children. This is similar to getting a second-hand car. Instead of producing a new child you get satisfaction from a second-hand child, i.e. another person's child. It may not be a perfect substitute but it will satisfy your biological needs. Likewise, a second-hand Camry may not be a perfect substitute for a brand new Ferrari but it will satisfy your transport needs.
4. Don't Get Married
Marriage looks lovely on TV. Couples stay with each other through all obstacles, each one giving selflessly to the other. The man rescues the woman when she is in trouble, and when he does this there is smooth uplifting music in the background and the action is done in slow motion to emphasize its significance. Unfortunately, real life is often nothing like that. Real life is a lot more sterile, a lot more boring, and a lot messier. In most rich countries, about 50 per cent of marriages end in divorce and with divorce comes bitter court battles and high family lawyer fees. If you're a rich person marrying a poor person, you could lose a lot. There are many gold diggers out there who marry only for the cash. They are the ones who win from marriage because, by marrying someone richer, they lock in the wealth.
Wedding ceremonies tend to be very expensive. I'm not talking about $6 million weddings like the James Packer's wedding with celebrities like Tom Cruise and wife Katie Holmes and even Rupert Murdoch and Wendi Chen. Statistically, your average wedding costs $21,000. Many females will also demand the man buy her a diamond ring, which will set you back even more.
Of course, the desire for marriage is like the desire for having children. Sometimes you get lonely. You drift through university and work with a lot of stress. You feel isolated and depressed. You feel worthless and insignificant. Scientists will convinced you that you're just another animal. The physicians will say you're just a lump of chemicals, tissues, and organs. Economists will say you're not even a human. You are a Homo economicus, a machine-like consumer, one small and insignificant part in the capitalist machine. The halls of academia paint a bleak picture of humanity. You are nothing, and you are worthless. So what is the solution to this problem? Sadly, there is none. At least, there is none I can think of. Except maybe one: delusion. There is where religion, marriage, etc comes in. I'd better move on to the next topic before I stumble into an abyss of nihilism and fatalism, which of course leads to nowhere except suicide.
Some people marry because they have sexual thirsts they need to quench. However, you don't need to marry to quench your sexual thirst. You can simply seek the services of a prostitute. Some people argue that prostitutes are more expensive, but you don't need to get a prostitute. If you have the ability to convince a female to marry you then you should have the ability to convince a female to be your girlfriend, and from this girlfriend-boyfriend relationship comes sexual activity. Many men, however, say that after marriage, sexual interest dies.
Seeking the services of a prostitute can be expensive, so a very cheap way of quenching sexual thirst is to do it yourself using your own hands. I won't say anymore as I believe this discussion is starting to get X-rated and I want to keep things clean because I don't want to offend too many people.
I have spoken about explicit after-marriage costs like weddings and children, but there are also significant before-marriage costs. Basically, to get marriged you have to show to a female that you are worthy of marriage. The same applies to males. For males, signalling to the female that you are worthy of marriage usually requires costly investment in status symbols like prestige cars. If you have no desire for marriage then the need to project status symbols may dimininish and this will lower living expenses. However, even after marriage many people go on projecting status symbols. Some might argue that marriage and children are status symbols themselves or at least most people use marriage and children as status symbols. For example, I spoke to my brother about not getting married and not having children to lower costs and he said to me, "So you're going to live like a loser?" Basically, he thinks that being a winner means you have a trophy wife and a couple of kids as well as a big house, a prestige car in the driveway, etc. This mindset I'm sure is ingrained into the minds of just about everyone. If you switch to a life of thrift, virtually everyone you meet will put you down. You are only human and being the victim of other people's negative opinions might lower your self-esteem. How do you fix this problem? Well, one way to give yourself a confidence boost is to remember that even if you don't have a trophy wife or other status symbols, you have saved heaps of money by depriving yourself of these things, and that money in the bank should make you happy. Remember there is a big difference between looking rich and actually being rich.
5. Work Heaps
When it comes to education, keep moving up the education ladder until you can take no more. After high school, go to university and get a Bachelors degree. It is better to work while you study but if this is going to reduce your grades then consider not working as much. When selecting a university, look at THES (Times Higher Educaton Supplement) rankings and go to the most elite university you can get yourself into. Get your Bachelors degree, then get your Masters degree, and then get a job. Don't get a PhD as usually it's not worth it. A Masters degree costs only one year and it increases your wage quite a bit. A PhD increases your wage but only by a little bit and it costs three years minimum to get. I wouldn't bother. Occupations like physician, lawyer, engineering, and finance tend to have higher pay, but be careful about generalizations and shoddy advice from friends and family. Do your own careful research on the Internet. I can't provide any here as labor market conditions change constantly (e.g. studying computer science may have been lucrative in 1999 but after the dot-com bubble burst it is not as lucrative anymore). Analyze the census statistics as well as graduate destination surveys. Don't think, "Oh, yeah, scientists wear nice lab coats so they must get paid heaps!" or "Mathematics is so difficult! I bet being a mathematician is a high-paying job!" If you are unable to get into university or if you are unable to get a Masters degree after you've gotten a Bachelors degree, there's nothing to worry about because it doesn't matter that much. You won't be able to earn as much, but you will have the advantage of getting into the labor market earlier.
Once you get a job, work heaps. If you are a physician or investment banker then that will be no problem because you will pretty much be forced to work almost 24 hours a day. If you have a more comfortable job with normal 40 hour weeks, i.e. nine to five Mondays to Fridays, then consider getting a second job. What matters when getting a second job is that you don't get a job that is too stressful. If your normal job is stressful as it is and you sign up for even more stress then that can't be good on your health. If you are, say, a statistician who works 40 hours a week then consider also working as a keyboard operator and work six in the afternoon until about ten at night from Mondays to Fridays. Right after you finish your day job as a statistician you drive to your second area of employment and do your night job. Then you go home, sleep, and come back to work. Throughout your weekdays you will do nothing but eat, sleep, and work. On the weekend consider getting a job as a junk mail distributor, i.e. a walker. You walk around people's neighborhoods and stuff junk mail into their letterboxes. This I find is excellent as a way to make a little extra cash on the side. Plus walking around on the weekends admiring people's houses and cars is very pleasant and theraputic. It lowers stress as well as giving you exercise.
Work as much as possible, but consider your health. You should get about eight hours of sleep every day, you should try to get into a habit of eating healthy food, and you should mix your jobs so that you don't do too much of something too stressful. When choosing jobs, it's good to increase your wage rate, but many people forget that simply by working more hours they can make more money. If the employer doesn't allow you to increase your hours, just get another job.
6. Invest Heaps
Set up your bank account so that as soon as your pay is sent in it automatically gets transferred to some investment account. By depriving yourself quickly you reduce the desire to spend money. What do you invest in? Many people like to invest in property. They get a mortgage and watch the house price rise. Plus they get rental income. There is a huge shares versus property debate and I am a fence sitter, even though I invest in shares. I don't invest in shares directly. I recommend you put your money into a managed fund or an index fund. These tend to give you a 10 per cent rate of return per year. Which managed fund you should use is up to you, but I recommend an index fund that tracks an S&P index, e.g. the S&P500 or the S&P/ASX 300. You might want to put some money into shares and some into property. You might want to get a margin loan to get even more money while being exposed to more risk. If you're uncertain about invesment, play it safe by putting all your money into a widely diversified index fund. Otherwise, talk to a financial advisor.
Conclusion
To sum it up, in order to achieve financial security as quickly as possible, you must live like a bum. Live as if you have no money, work as much as possible, and invest most if not all of your money.
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