Hello, dear readers! This week, I’m diving into a personal financial journey that taught me the invaluable lesson of living within one’s means. Early in my marriage, I was entangled in a web of debts and obligations, owning fully leveraged apartment buildings with negative cash flows, leased cars, and a substantial mortgage. My financial strategy at the time was based on the popular belief that leveraging would lead to success. But was it really working?
I’ll never forget the pivotal moment when my wife posed a simple yet profound question, “Why do we own these apartment buildings?” My response was rooted in the hope that they would appreciate over time. Her counter was sharp and to the point: “Yes, but they are losing money.” Her logic made me realize that I was on a financial hamster wheel, tirelessly running without making any real progress.
My wife had a different approach to finances—one that revolved around the concept of cash and carry. We decided to sell the buildings and focus on paying off our mortgage by making extra payments each month. This shift in strategy allowed us to save consistently and invest our savings wisely. Occasionally, we borrowed to remodel our home, or for a real estate investment, but always with a conservative plan and never over-leveraged.
Here are some actionable steps we took:
Sell non-performing assets: If they’re draining resources without offering returns, it might be time to let them go.
Focus on reducing debt: Make extra payments where possible to chip away at your mortgage or other large debts.
Embrace saving: Prioritize saving and invest those savings wisely.
Borrow wisely: If you need to take on debt, do so with a clear, conservative plan.
The moral of the story? Living within your means is a mindset worth cultivating, and sometimes being a cash and carry person can be incredibly liberating. As a wise old investor once told me, “You always want to be on the right side of the interest fence.”
Alternative perspectives suggest that some leverage can be beneficial, especially when investing in appreciating assets. However, it’s crucial to balance risk and have a clear exit strategy.
