retire early
At the end of this semester, I will be taking early retirement from my job as a college professor. I will have just turned 54 years old. How am I able to quit my job at such a young age?

I actually started a retirement plan over 30 years ago. Despite some setbacks and detours, I was able to stick to that retirement plan. I am looking forward to reaping the rewards of my financial decisions soon.

I have listed here the most significant financial decisions I made throughout my adult life that most impacted my ability to take an early retirement.

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Congratulations! You’ve just landed yourself a big promotion a work, got a substantial return on an investment, or maybe even won the lottery. Whatever it may be, an increase in income always warrants celebration. Many people get too excited and increase their spending habits too much in response though. As a result, they only find themselves back where they started or maybe even worse.

Lifestyle inflation is hard to curb with any increase in income. The temptation to spend is real and definitely hard to avoid, no matter how determined you might be. After all, you’ve worked so hard for it, and you should be able to enjoy it. However, it’s important to be mindful of what you do with your extra income at the same time. While it may be hard, making wiser decisions now will set you up for a better financial future in the long run. If you’ve recently found yourself in a position with more income, here are some tips to help you curb lifestyle inflation wisely:

Understand Your Goals

It’s easy to spend money but saving it is much harder. Before you go out and make a big purchase with your new found income, take a moment and understand your short-term and long-term goals. Where do you want to be in 5 to 10 years? What do you need to change now to get there later? Re-evaluating your goals will help you plan better for your future and also remind you of the challenges you might face and the decisions you need to make now to get there later. While a raise today seems significant, it might only be a dent in the bucket in the long term.

Re-Examine Your Budget

You should always re-examine your budget on a regular basis but it is especially important when you get a raise. First, ask yourself this – would spending more in any categories make you significantly happier? Would keeping your budget as is negatively effect your standard of living at all? If the answer is no to either, consider keeping your budget the same. While you might want to spend a little extra here and there, keeping your spending habits the same will save you more.

Transfer to Your Savings

As the saying goes, out of sight, out of mind. You should consider automatically transferring excess fund directly to your savings account. You can set this up to occur monthly or biweekly so that you won’t forget. This way, you’ll watch your savings account grow nicely over time. However, it’s also a good idea to start thinking about how you can invest these savings as it grows. Investing the money wisely will help you get more return over time.

Prioritize Your Debt

How to pay off debt should be one of the first things you think about if you owe. Letting debt sit over time of course builds interest. If you have extra funds to put towards paying your debt down, you should definitely consider it. Once it’s all paid off, you’ll feel a burden lifted off your shoulders. You’ll then be able to really enjoy a lifestyle inflation if you choose to.

Splurge a Little

Lastly, it’s ok to splurge a little. Often times when people talk about lifestyle inflation, there’s a definite negative connotation attached to it. Yes, many people take it to the extreme and start spending money they don’t really even have. But with smart, strategic decisions, you can still enjoy a small boost to your lifestyle while saving for your future. So go ahead, invest a little bit of the sum on yourself. You should be able to enjoy it. Just don’t make it a common occurrence.

financial crisis
You would think high interest rates and recent years of higher inflation would devastate people’s finances, but the data keeps telling us that the economy is still humming along nicely. Still, have you thought of what you would do if you experienced a financial crisis recently? A sudden job loss or a medical emergency could leave a family without it’s usual income. Even if a healthy severance package was given or a large emergency fund existed, you wouldn’t want to keep on living as if nothing happened. You’d still want to cut your expenses as much as possible if a financial crisis occurred. You’d want to conserve the funds you had until a normal flow of income returned.

How much could you quickly cut from your monthly budget if you experienced a financial crisis?

I went through my monthly expenses and added up the things I could quickly cut:
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deal on clothes
I love to get most of my family’s clothes from thrift stores and yard sales, but I don’t always buy our clothes there. That’s because I can sometimes get brand new clothes at a lower price than used clothing. Here are a few of my strategies for getting super cheap brand name clothes (for less than thrift store prices).

1. Shop Right After a Holiday
I seem to find the best deals right after a holiday, whether that be Christmas or even Halloween. This year I went to Baby Gap and Gymboree the day after Halloween, and I scored matching shirts for my daughters for $3-4 each, socks for $.49 each, and shoes for less than $4. The prices ended up being about 80% off the sticker price. At the thrift store, I can generally find shirts for $2-3, but if it were to have a tag on it, those nice thrift store employees mark it up a few dollars (insert eye roll here).
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Although it doesn’t top the list of things we hope to do this year, 16 percent of us have placed “finding a new job” on our 2017 resolutions list. One of the driving factors is that we’re recognizing opportunities for better pay in a more robust job market (statistics are predicting a high demand for experienced mid to senior-level workers). While your first agenda is, of course, to land a new job with better pay and benefits, what you do after you’ve been hired could make or break its potential to change your financial outlook.

Once you’ve achieved that new job, here are four financial steps you’ll want to take as soon as possible.

#1: Update your financial tracking

Obviously, a loss of income has us rushing to adjust our budget faster than when we gain income, but it’s still important to track any changes. Plugging those numbers in will show you exactly how far ahead you are once taxes and other changes are figured in. Having a specific rather than a general idea of how much you’re adding to your bottom line ensures getting the most financial advantages out of your raise. It also decreases the chance of your extra income getting absorbed into discretionary spending without realizing it (some call it lifestyle inflation).
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College tuition has steadily been increasing over the past several decades. In the last five years alone, it has skyrocketed by 28.9 percent.

While the four-year cost for an in-state university was around $42,000 in 2021, the price tag is projected to be around $350,000 in 18 years – which is just after the time my two kids will be college-aged.

As I take a deeper look into my financial plan, I’m torn. Should I be diligently saving for their education, or should I be investing my extra money into my own retirement account?
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