Thirty-eight-year-olds Al and Lesia Riddick of Fairfield Township, Ohio, have practiced disciplined money management since marrying in 2002. So, when their household income dropped from $225,000 to $104,625 after Al's job loss in 2010, the couple quickly adjusted to bringing home less. "We used to go out a couple of times a week, or leave the country three or four times a year. We had to back that down to two times a year,†says Lesia, a business analyst at a consumer products company. In 2007, the Riddicks finished paying off $150,000 in debt: the mortgage on their three-bedroom ranch and Lesia's student and car loans. Since then, they've lived on 52% of their income, so when Al lost his job, though they felt the loss, it wasn't traumatic. After the couple pays for utilities, groceries, recreation, and other living expenses, they invest 10% of their income in their Roth IRAs; another 10% goes toward charitable donations; and 9%, toward their whole life insurance policies. Without any debt, the Riddicks are free to focus on building their net worth and planning for a comfortable retirement. They contribute the maximum allowable to their 401(k)s and so far, the couple has accumulated about $593,000 combined in their retirement accounts. "We strongly believe in giving every dollar that flows through this household an assignment,†says Al, who, after being laid off, started Game Time Budgeting L.L.C., a financial fitness coaching organization. "We still live off one income and reinvest the profits from GTB back into the business.†"We don't believe in being house-poor. A lot of people tell us that they expect us to be in a bigger house or drive a more expensive car,†says Lesia, who drives a 2000 Toyota Solara. "People say, ‘You're an engineer, you should be driving a Benz.' But we think other things are more important.†Al drives a 2008 Mercury Mariner that he purchased from his previous employer for $13,500. "I still drive my old company car because I was in sales,†he says. "When you get laid off they want their car back, but I ended up buying it.†However, Lesia admits that she didn't share Al's discipline about money until after they started dating. "I had to get out of the ‘it's time to upgrade' concept. I was the one with new cars. When we started dating, I had just bought my car as a gift to myself because I had finished my master's. Al was like, ‘Why did you do that?'†jokes Lesia, recalling that conversation in early 2000. But today she says, "He's become a role model to me. Now I realize that all the material things aren't that important.†(Continued on next page) However, Al is quick to let people know that he's no cheapskate. "I don't want people to think I'm the cheapest guy on Earth. I do spend money, but I don't splurge to the degree that some people do. My wife has received some expensive gifts,†Al says, mentioning the $1,200 that was recently approved in the budget for Lesia's latest Louis Vuitton bag. As the Riddicks point out, living within their means doesn't mean doing without. "We do have some nice things,†says Al. The couple's rule of thumb to buying those things is simply, "If we can't pay for something in cash, we can't afford it.†How We Did It Pay off debt first. Before paying down the debt, we were investing a lot toward our retirement. We backed down on retirement and paid the debt off. It was the best decision, because having debt would have forced me to find another job when I was laid off. It took us three years to pay off the debt. First, we paid off the student loan ($10,000). Second, we paid off Lesia's car ($18,000), and finally, we paid off the house ($122,000) in 2007. In that final year, we were paying almost eight times the regular mortgage payment. We achieved our goal by paying off the debts from smallest to largest. Because we prepare a monthly spending plan, we knew exactly how much money would go toward debt elimination. If any extra money came in (for example, a bonus check), we put that money toward debt as well. After deciding to become debt-free, we simply allocated more money toward debt reduction instead of spending normally on items we considered wants, not needs. Become broke on purpose. By creating a monthly budget, or spending plan, our goal is to be broke on purpose. By this, we mean giving each dollar coming into our household a purpose and direction so that income minus savings and expenses equals zero. Start by knowing exactly where you are. Most people don't create a spending plan or budget, so they don't know exactly what's going out or where it's going. You have to figure out what you have and maybe give up some things. We have separate budget lines for recreation and dining out. To us, those are two different things. You have to be very specific and account for every penny. Live on one income. Every couple should pretend that they have to live on one income for one month just to see the impact of a what-if scenario. This may help identify areas of wasteful spending. Once you distinguish wants from needs, the next step is to set goals for the excess cash. For example, you may want to increase your emergency cash reserves or eliminate debt.