Monthly Update: May 2008(-$50,849.30, -$894.17)
We continued to tread water again last month.
We are balanced on an edge, living within our means each month, but not investing in our future. We are able to keep our monthly bills within our normal monthly cash flow. Unexpected expenses force us to dip into our savings to pay for them.
Here are the results for the month ending May 31st:
My thoughts for the month:
If we owned our home, instead of renting, we would actually be making forward progress each month.
Most people are good at living within their means. They can pay their bills each month but they don’t have much left over to save and invest.
We rent, which means that none of the $800 that we spend each month goes towards our net worth.
If we owned our own home, our mortgage payment would be money being invested in our net worth each month without having to skimp and save extra!!
This is why for most people, the majority of their net worth is tied up in their homes. They need a roof over their heads and they are good at paying their bills but not saving extra.
The second point I noticed was that I am glad that we were able to save when we had the chance.
My wife and I were somewhat lucky to be able to place some money into savings and investments when we had two incomes and few expenses.
Now while our budget is tight, those investments are the primary source of gains in our net worth.
Try to save while you can, starting as early as you can to take advantage of compounding interest.
The final point is that those two actions; owning your home and saving for retirement are treated very favorably by the IRS. Not only are they two of the best ways to increase your net worth but they are two very good ways to keep your earnings out of the hands of the tax collectors.
