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Experience is What You Got When You Didn’t Get What You Wanted

July 29, 2016 By Scotty

The Year was 1999. There was a Gold Rush going on.  Buyers were snapping up Technology Stocks at outrageous prices. It made no difference if these New Companies had No Earnings…No Problem. This Time it was Different!

That year a friend quit his job at Dell to become a Day Trader. I also fantasized about retiring early from my TV News career. Who needed to punch a time clock anymore? The “Smart Money” was chasing fabulous returns by investing in any website with DotCom in its name. Why invest in Boring Bonds, Crappy CD’s, or Stale Real Estate?

Unfortunately, Good Times only teach us Bad Lessons. You know what happened in 2000 when the Tech Balloon Burst and those High Flying “Can’t Miss Companies” like pets.com and eToys.com crashed to Earth.

8 Years later the Great Recession humbled millions more, stealing more than $19-Trillion Dollars of Household Wealth. What did these Economic Calamities teach us?

ETERNAL TRUTHS

1. There is a direct correlation between Risk and Reward. However, Riskier Investments cannot be counted on to deliver higher returns…If Riskier Investments reliably produced higher returns, they wouldn’t be riskier.

2. Markets are unpredictable, but, Costs are forever.

3. Diversification is the only “Free Lunch” in Investing. It protects your Portfolio over the Long Term.

4. Bear Markets are the friend of the Young…allowing them to buy “Stocks on Sale” If they have the Courage.

5. Economic Cycles still exist. Astute Investors profit from them.

6. Most of us Overestimate our Risk Tolerance. After all, It is one thing to train for a Crash Landing in a Flight Simulator. The Real Thing is something else entirely…

7. Your best chance of securing your Financial Future is to live a “Thrifty Lifestyle.” Invest in People and Experiences. Enjoy the Journey.

So, what do you think? What are your Favorite and Least Favorite Financial Memories? What did those experiences teach you? Can you add any Eternal Truths?

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The $763 Pills I Couldn’t Swallow

July 22, 2016 By Scotty

The $763 Pills I Couldn’t Swallow

 

During a recent medical exam my doctor recommended I start taking a daily dose of a well known medicine. I requested a generic equivalent instead of the brand drug. I nearly fainted From sticker shock when I got to the pharmacy and saw the $763 price tag for a 3-month supply of the generic version! (The brand name drug would be more than $900 at my pharmacy.)

Medical costs have skyrocketed during the past decade, averaging 8.5% higher every year. Who can afford to get sick? Who can afford to pay for preventive medications to stay well?

I lead a healthy lifestyle. I eat a balanced diet. I exercise daily. I don’t smoke. But, I can’t change my DNA.

I did some research and found a similar medication at a local pharmacy for $753 less for a 90-day supply. Hopefully, this $10 solution will keep me well. It may already be working. Just thinking about the money I saved…I swear I can already feel my blood pressure dropping…

So, what do you think?  Have you had any Prescription Nightmares?  Do you have any suggestions on how to get good, affordable medical care?

 

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Is There a Creep Wrecking Your Retirement Plans?

July 20, 2016 By Scotty

I’m talking about Lifestyle Creep. That’s where your Standard of Living increases as your Discretionary Income rises. Former luxuries are now considered necessities.

LIFESTYLE CREEP EXAMPLES

That occasional Starbucks Latte becomes a daily habit. You begin eating out more frequently instead of bringing your lunch most days. You buy a bigger house because you got a raise.

Lifestyle Creep makes it harder to get out of debt, save for Retirement, or meet other Big Picture Financial Goals. It’s what causes people to get stuck in the Rat Race just to pay the bills. Lifestyle Creep can rob you of the cash you might need to fall back on when an unforeseen setback like a medical bill or job loss arises.

WHY WE DO IT

We tend to increase our spending each time our income goes up because we believe that the additional goods and services we are purchasing will make us happier. Often, those purchases don’t make us happier. A better option would be to work toward Financial Independence by saving more.

The cumulative impact of Lifestyle Creep is significant because increases in Lifestyle Spending not only means there’s less money to save, but also that higher Lifestyle Spending means we need even more to Retire in the First place!

HOW TO AVOID LIFESTYLE CREEP

1. Increase your Contribution Rate to Retirement Accounts like IRA’s, 401k’s, 403b’s. Sign up for your plan’s Auto-Escalation feature. Money not seen is not missed.

2. Save Half of any Raises or Bonuses in your Retirement Accounts.

3. Save the maximum amount allowed in your Health Savings Account.

4. Set a Savings Challenge for yourself. Make Saving a “Point of Pride.”

5. Track your Expenses.

Avoiding Lifestyle Inflation can mean achieving Financial Independence at a younger age, having the Financial Flexibility to choose a Dream Job over a higher-paying option, and Retiring Early! After all…Who wants a Creep in their life?

So, what do you think? Where do you see Financial Creep in your life? How do you combat it?

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Reaching Financial Freedom is Simple…But, It’s Not Easy

July 14, 2016 By Scotty

My dad used to tell me about the 4 ways to become rich…

1. You could inherit it.

2. You could steal it.

3. You could win it.

4. You could live on less than you earn and invest the difference.

Most of us cannot count on the First 3, so choice 4 makes the most sense. However, many of you will never reach Financial Freedom. Here’s why.

THRIFTY MINDSET

You have not yet adopted a “Thrifty Mindset.” What are you willing to give up to reach Financial Independence? Our Instant Gratification Society tells us “To consume more right now.” But, the path to Financial Freedom requires delaying that gratification…sometimes for decades.

I am not advocating becoming a Miser. Merely, living below your means. Paying yourself First. Paying off debt. Investing wisely. The “Secret Sauce” is adopting a frugal lifestyle where you combine Financial Education with small Behavioral Changes.

30 DAY CHALLENGE

How about giving a “Thrifty Mindset” a 30-day test drive? Document your spending for a month. Pause before each purchase. Ask yourself, “Do I really Need this? Or, do I merely Want it?” Is there an Emotional Component behind your desire to buy this item? Figure out what truly brings Joy to your life.

Eventually, you will arrive at a Tipping Point where Delayed Gratification becomes a Point of Pride…an Achievable Challenge. You will be on the Freeway to Financial Freedom. Enjoy the Journey.

So, what do think about your own path to Financial Freedom?  Please share your thoughts…

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Your Roadmap to Retirement Success

July 6, 2016 By Scotty

When can I retire? That was the most popular question I heard from clients during my stockbroker/investing career. The answer is…It Depends…

It depends on how you prepare for your retirement. It also depends on how you measure readiness. Here are the levers you can pull to speed up your retirement plan.

1. Be Thrifty. Live a frugal life. Spend your money wisely. Read “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko. Don’t confuse Wealth with Income.  Be Debt Free.

2. Be a Saver. Don’t save what is left after spending. Instead spend what is left after saving. Make saving an automatic habit. As my Dad used to say: “ Save as much as possible, as soon as possible, for as long as possible.”

3. Be Accountable. Prepare a budget. Keep track of saving and spending. A simple Excel spreadsheet works fine. Dave Ramsey has an excellent budget tool. Some folks like Mint.com.

4. Be an Investor. To become Financially Independent you need your money to work for you. To become a savvy Investor, you need to read and understand personal finance. Some of my favorite authors: Howard Marks, Ben Graham, John Bogle, William Bernstein, Jonathan Clements, Scott Burns. Investors should remember that Excitement and Expenses are their Enemies. Low cost Broad Based Index Funds typically earn higher returns with lower risk than managed investments over an Investor’s lifetime.

5. Be humble. If you get too greedy you may discover that “Pigs get fat…Hogs get slaughtered.” Know that you will make mistakes. Learn from them. You only have to do a very few things right in your life so long as you don’t do too many things wrong. Know the difference between Price and Value. “Price is what you pay, Value is what you get.”

6. Be Generous. Be generous with your time, your praise, your wealth. Generosity leads to Prosperity.

7. Be a Student. Keep learning about personal finance. Ask questions. Think for yourself. Ignore the “Financial Pornography Pundits” on TV, Radio, & at the Newsstand. Remember, if you do what everyone else does…you will get what everyone else gets.

So what do you think? Do you have any other ideas for your Retirement Roadmap? Please share them with us.

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Do You Live in a Thrifty City?

June 30, 2016 By Scotty

Do You Live in a Thrifty City?

I live in Austin, Texas. I live in a Thrifty City.

I define Thrifty City as a place where you can live on a modest budget. A place with plenty of free, fun, educational activities. A Thrifty City is a great place to live and a wonderful place to retire!

Austin and its suburbs have beautiful, free parks to visit, free community plays and concerts, free museum days, book fairs, sports programs. The University of Texas hosts many free or low cost activities.

I learned how to dance Country and Swing styles by joining Meetup.com. I host free Standup Paddleboard tryouts with a couple of Meetup groups. You can join a group of like minded people participating in free activities no matter what you enjoy. It is a wonderful way for newcomers to stretch their social legs.

What if I live in an expensive city?

You can still live a Thrifty City lifestyle. I have relatives who live in the San Francisco Bay area. They pay much higher housing costs than the rest of us. However, they have tapped into the “sharing economy” to boost their lifestyle without busting their budget!

Do some local research to find out how you can have more fun for less in your Thrifty City.

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