Once you’ve got your cash flow under control by spending a lot less on housing, then you can begin hammering away at getting out of debt. Downsizing means downsizing everything. You’re ultimate goal is to live on 50% of your take home income. If you do that, you can retire at 100% of your lifestyle and never have to take a pay cut to yourself – until you die. That means you shouldn’t spend more than 25% of your income on your house, and it also means (this is going to hurt) you should never ever finance a car.

Financing a car is dumb. Financing anything that has no way of holding its value and returns you no cash flow is financial suicide. You can consider financing a truck for your business, if the truck itself makes you a thousand dollars a month or something, but individuals should never finance a vehicle. You would be better off renting one for long trips (which is actually a good idea – let someone else pay the insurance and wear and tear). No, you need to buy your vehicles with cash, and that means paying off your current car loans, and then continuing to make car payments, but make them to yourself. In just a few years, you’ll have enough money to buy a car with cash, and keep all your cash flow in your own pocket, instead of some dude driving a ferrari who sold you a yugo.

next, never buy new cars. You can get a car that is basically new and actually profit a bit from someone else’s impulsiveness. The last car we bought my mom was paid for with cash. It was a 2005 SUV with 7,500 miles on it. It had all the trimmings. The exact same model on the dealer lot was close to $40,000.000. Because it was “used” and just out of new model year status, AND we were paying cash, we got it for right at $22,000 dollars. That’s right, almost half price. We kept $18,000.00 of our own money for the same vehicle, and that;s not all. If you financed the forty grand, you would also be giving up an extra eight thousand five hundred dollars in interest. Meaning we spent $27,000.00 less than the average sucker who financed the same car new off the lot. And all we gave up was 7,500 miles on the odometer.

Doing things like that: keeping $27,000.00 you might have spent on a car over four years, keeping $48,000.00 you might have spent on a house over four years, saving a couple of hundred dollars a month on the smaller house in lower electric and heating costs can add up to some really big numbers pretty fast. In our scenario, the person bringing home $4,000.00 a month who uses these principles can end up completely debt free and have a whopping $250,000.00 in the bank at the end of ten years!

Now, all of this means you’re going to have to make decisions about your money every single day for the next ten years. Do I spend it – or keep it? Do I get another year out of this car while I save for another one – or get silly and walk onto the dealer lot because they have balloons? Those may sound like tough decisions, but you’ll find out that keeping your money gets a little addictive after a while. You’ll find yourself thinking things like: if I get two more years out of this car and then buy a nice, cheap used one, I can take a vacation to Paris for two weeks!

Now, money is there to spend, because, of course, you can’t take it with you. You don’t have to leave a huge pile to the kids, they can make it on their own. So yes, you should own nice things and go nice places, but you have to do so in a way that doesn’t leave you bankrupt. And that’s how financial discipline works. If you make out a new budget right now that only spends 50% of your cash flow, you’ll be completely debt free and on easy street faster than you can imagine. Spend on decade getting your financial discipline down pat, and you’ll never have to worry about money ever again. That’s what your grandad meant by discipline – doing the right things over and over again until you are completely free.