When Theresa and I moved in together in 1988,  we had almost nothing. Theresa owned her car, and had a bank account.  I did not have a car, and my “account” was a negative number.  My net worth started with a negative.

We rented an apartment, and we had almost nothing in it.  We had no bed, and no mattress.  For the first few months, we slept in sleeping bags, until we could afford to purchase a mattress.  Then we saved, and eventually purchased a bed for that mattress.

I remember my sense of desperation at the time, wondering if we would ever have anything to call our own.  And Theresa sat down with me, and shared four common sense financial ideas with me.  I think of these ideas as a first step in financial literacy….or at least a first step in “living within our means”.

Theresa promised me that if I did these four simple things, faithfully, that I could someday retire a prosperous man, if I wanted to do so.  The four things she suggested were:

1) Have zero credit card debt.  In other words, pay our credit cards in full, every month.  Pay no interest to credit card companies as a result.

2) Have no car payments, and pay no interest on car loans (if a car loan is needed).   And drive modest cars…they don’t last forever anyway.

3) Brown bag our lunches.

4) Maximize our tax-deferred savings (e.g. 401ks, IRAs, 529s).

Our report card:

1) Excellent-We never have credit card debt.  I’m not allowed.  If we can’t afford to pay cash for it, then we can’t afford it.  If I don’t like that, too bad.

2) Fair-  We haven’t paid cash for our cars, but we do purchase cars.  We purchase modest ones (I buy Fords, but I want Porsches or Ferraris….I’m not allowed to have a fancy sports car).

3) Excellent- we have brown bagged our lunches forever.  We have, and our daughters have, and our dog does, when he goes to day care (yes, our dog goes to day care).

4) Excellent- we do maximize our tax-deferred savings.  And we can afford to do so, because of 1, 2 and 3 above.

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A few thoughts on the “Why” behind this…..

1) Credit card debt is a killer for a lot of people.  People purchase things on their credit cards.  Sometimes those items are on sale.  But if someone purchases an item on sale, but doesn’t pay the credit card bill in full, the net cost of that item rises.  In fact, it may double, (or more) over the life of the credit card payment.  Credit card interest is not tax deductible.  It benefits no one except the credit card company.

2) Car payments-  I want to drive a Ferrari.  I drive a Ford instead.  I read someplace that we should “purchase experiences, not things”.  The idea is that the memories of experiences improve over time, whereas things depreciate over time.  Makes sense to me.

3) Regarding our lunches, I assume that it costs about $7-10 a day to purchase lunch (maybe more, depending on where you live and where you eat).  For four of us, I assume that we save about $35 a day by brown bagging our lunch.  We don’t all go to school or work every day of the year, but it is safe to say that we save approx. $10,000 a year by brown bagging our lunch.

4) 401ks and IRAs are probably a topic for another day.  But it is safe to say that we have been very fortunate to be able to take advantage of these tax-deferred savings plans.

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Theresa was right with her common sense financial tips in 1988.  That simple advice still works in 2015!

Hal