Name: Aaron Patzer
Profession: Founder & CEO of Mint Software
Networth Range: $100,000+
Websites: www.mint.com
I try to follow all three.
The first one is perhaps the most difficult. Living within your means basically boils down to only buying the things you really need, and consciously saving up for all the fun stuff. I have two cars, a 1994 Jaguar and a 1996 Ford Contour. I bought both used (or “pre-owned” if you want to feel better about yourself), and paid cash. The Contour isn’t worth much, so I don’t pay for comprehensive & collision on the insurance. I intend to drive both into the ground. If I want to have fun, I’ll rent a convertible on vacation. I rarely dine out. Instead I learned to cook (which impresses the ladies 
, is healthier, and saves a lot of money. Last week to celebrate Mint’s Series A financing, I made filet mignon for two. Total cost ~$25; in a restaurant, easily $100+.
I also pay off all my credit cards in full every month. If you have the discipline to do this, use your credit card for everything. It’s safer than the debit card, gives you an interest free loan for 30 days, and rewards (points or better yet cash back) for anything you buy. The best card for you depends on how and where you use it (e.g. 5% cash back on gas might be the best if you commute, 3% cash back on groceries may be the best card for a family). Let Mint automatically figure it out for you.
“Make your money work for you” means I invest almost everything I save. I usually assume an 8% real return on my money: 11% average S&P return from 1980-2006, minus 3% inflation. If I put away $500/mo each month from age 30 onward, it means $1.2m by retirement, even though I would have only “saved” $210k. Compound interest is a beautiful thing.
I invest almost exclusively in index and mutual funds. Individual stocks vary too wildly, and being a busy CEO, it’s too difficult to keep up with all the relevant news/developments with any one company. My favorite funds are probably the Vanguard S&P 500 index fund (low expense ratio), and the Royce small-cap funds (long term performance).
“Plan for the unexpected” recognizes that stuff happens. You might lose your job, get sick, or have a family emergency. I keep about $15,000 (3 months expenses) in savings just in case. I could invest this amount, but if I needed it, I might be forced to sell just as the market is tanking.
Now, putting your emergency stash in a Wells Fargo or BofA account would be dumb. Instead I keep the bulk of it in ING Direct (4.50% interest). Emigrant Direct is up to 5.05% so I’ve been contemplating a switch (plus Mint has been suggesting it, and I ought to listen to the software I designed!).
Best Financial Tip:
Put 10% of your earnings straight into a stock index fund.
You’ll never see it in your bank account so you won’t miss it, and within 10 years, you’ll be seriously rich. If you actually do this one thing, I guarantee you’ll soon be (financially) ahead of 99% of the people in the world.
