July 15th, 2009
The secret to not getting rich is to set your lifestyle around your income.
To simplify things, we’ll take a look at the following hypothetical scenario from a high level and assume no investment spending occurs. Bob earns $100,000 in a given year and spends $100,000 in that same year. Sue earns $50,000 in a given year and spends $40,000 in that same year. Sue is therefore able to build $10,000 more wealth than Bob despite earning significantly less than him.
Sue is able to build more wealth than Bob because she spends her money based on what she needs to live her modest lifestyle. If Sue gets a promotion and earns $60,000 next year, she won’t spend more to move her lifestyle up, instead she’ll still only spend $40,000 next year.
Bob however sets his lifestyle around his income. If Bob gets a promotion and earns $120,000 next year, he would increase his spending to $120,000 next year to live a more luxurious lifestyle.
If you emulate Bob and set your lifestyle around your income, you will never get rich.
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tim
Categories: Frugal Living, Misc, Saving Money
July 8th, 2009
If you want to get a quick estimate on how long it’ll take for you to double your investment the rule of 72 is for you.
By simply taking your rate of return and dividing it into 72 you’ll figure out roughly how long it’ll take to double your money. e.g. If you are getting a 6% return on your investment (compounded), it’ll take about 12 years for you to double your return since 72/6 = 12.
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tim
Categories: Investing
July 1st, 2009
There are two main ways to increase your cash flow. The first way is to decrease your spending (money that leaves your pocket). The second, which I haven’t written as much on recently is to increase your income. Below are several ideas on how to increase your income.
Sell Your Old Stuff
Most people have junk laying around their place that they don’t use anymore. If you have a few items that you’re willing to part with, list them on Ebay or Craigslist. If you have a ton of stuff consider having a garage/yard sale.
Rent Out Extra Rooms
If you have a spare bedroom or two, consider getting a roommate.
Get a Part Time Job
Find a job doing something that you like in the evenings or weekends.
Offer Your Services
If you have a skill such as photography, painting, or computer repair, offer your services for a fee. Even if you don’t have a specific skill set, you can always look into areas such as lawn mowing, dog walking or shoveling snow.
Optimize Your Full Time Job
Asking for a raise or getting a higher paying job is usually the most efficient way to make extra money.
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tim
Categories: Career, Making Money, Work