The idea of being “set for life” is never having to worry about bills, making ends meet, and living paycheck to paycheck. We all want to live a stress-free life enjoying the things we do and not having to worry about tomorrow. Unfortunately, that is not the reality for many people.
We live in an era of excess and abundance. Everything we ever want is a click or swipe away. The ease in which we can acquire things has become exponentially easier with constant advertisements, high-limit credit cards, and generous financing. Unfortunately, many individuals have the mentality that using a credit card of financing something is not really spending money. They think “Why worry about the bill when it’s not technically due today? I’ll just use a credit card!” Or “I’ll just finance it! I mean the monthly payment is only $550 for 72 months!” Hundreds of people over-leverage themselves financially into a bottomless pit of debt. Where does this leave us?
Current Condition of the Average American
Well, let’s take a look at the figures. For automobile loans and payments, the U.S. has over $1.14 Trillion in auto loans as of last year. The average loan that an individual takes out is $29,921.27 with an average monthly payment of $530 for new vehicles. The student loan debt has ballooned to over $1.56 Trillion spread amongst the 45 million Americans who hold these loans. This means the average student loan holder is forking over $393 per month (assuming not in deferment) while 11.5% of student loans are 90 days delinquent. We also have credit card debt, with the average American household being $5,700 in debt. Americans have all of this debt to pay off with a median household salary of around $60,000. A simple $400 emergency might spell financial ruin for us. With all of this debt, how are we ever to save up for what we want? How do we ever buy a house? Send our kids to college? Enjoying a lavish retirement? How do we become Set for Life?
Set For Life by Scott Trench
A good starting point for everyone is reading Set for Life: Dominate Life, Money, and the American Dream.. The book breaks down the process of saving money, cutting expenses, and investing in your future into three parts.
Part I:
Where most people struggle. The point of this part is to reduce your spending, expenses, and debt. Point of this part is to change your mentality towards money. He teaches the concept of frugality and living below your means. It costs nothing to do and everyone can start today. The goal is to take you from negative net worth to $0 to $25,000 in savings. This seed money will be the start to your journey to financial freedom. This money will give you increased flexibility to take risks to compound your income.
Part II:
In this section the author takes you from a net worth of $25,000 to $100,000. Now this book emphasizes real estate as the main mode of increasing income. If you do not think real estate will be the route for you to achieve financial freedom, then this book might not be the book for you. However, if you think real estate is for you then buckle up. Trench encourages “House Hacking” near your workplace to save on rent and transportation. “House Hacking” is buying a house with your saved $25,000 and then getting a roommate to help with the mortgage costs. This way you can save on rent, bills, and transportation costs while building equity. After a few years of doing this you can get another property with your savings and repeat the previous steps.
Part III:
Once you build enough equity and passive income with your rental property while living frugally, you now can take risks with your day job. You can now move past the 9-5 grind and pursue what you really want. You can now take risks with starting a personal business, creating products, or selling services. This will allow you to work by the hour and charge by the hour at a higher rate than your salaried position.
And just like that you are financially independent…
Now I know this is easier said than done, especially in high cost states such as California. Trench is a little zealous in the way he describes a path to financial independence, however, I think the key takeaway is the mentality this book provides.
The simple lesson I learned from this book is, live below your means, save the difference, and invest as much as you can in your future.
I highly recommend you read it. Always stay ahead of disaster.
-E J
