The simple life makes cents

16 Guiding Principles for Accumulating Net Worth

By Larry Ferstenou

Based on You CAN Retire Young

Accumulating the net worth needed to meet long term goals (like retiring by 55) can be accelerated by simplifying your life, taking control of your spending, choosing rational lifestyle trade-offs, and following a number of guiding principles that my wife and I successfully implemented to retire young.

1.  If it’s not on sale, don’t buy it.

2.  If it is on sale, and you need it, buy in quantity.

3.  Establish spending priorities based on your future goals.

4.  Make rational trade-offs in spending and save the difference.

5.  Take bonuses, raises, gifts, tax refunds, and other “extra” money and invest it in your retirement accounts. (It’s hard to miss money you never had and it will compound into a significant sum over time.)

6.  Buy basics, not trends.

7.  Shop the clearance sections of stores for discounts of 50 to 75 percent (sometimes even more).

8.  If you can’t afford to pay cash, you can’t afford it (exceptions: your house and probably your vehicle).

9.  Don’t pay interest on loans; collect interest on savings.

10.  Buy used if it hasn’t been abused.

11.  Don’t buy from vending machines or convenience stores.

12.  On big-ticket items, do your research and buy reliability.

13.  Take advantage of off-peak discounts for such things as dining out, travel/recreation, movies, and seasonal items.

14.  Buy less and go for better quality—unless you don’t want it to last a long time.

15.  On big purchases ask yourself, “Is buying this item worth retiring later (or maybe never being able to retire).”

16.  Occasionally reward yourself for living by these guiding principles most of the time.

With sufficient motivation and effective long-term strategies, you can accumulate the net worth needed to achieve your future goals. Of course, the higher your financial aspirations, the longer you can expect it to take. Our dream was to retire young—and that's what we did. If you have a similar dream, then the guiding principles above can also help you. Start applying them today. 

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Larry Ferstenou retired over ten years ago at age 42 and is the author of You CAN Retire Young: How to Retire in Your 40s or 50s Without Being Rich (American Book Business Press, 2002). More information can be found at www.youcanretireyoung.com. Copyright © Larry A. Ferstenou, 2002–2003.