Investing is how the rich get that way.

I was listening to a podcast episode of Listen, Money Matters called 21 Reasons You’re Broke.  One of many that really stuck out to me was the 18th reason that you’re broke.

You’re broke because:
“You don’t invest or pay yourself first.  Investing is how the rich get that way.  If you don’t pay yourself first, you won’t have anything to invest.”

Cutting expenses is fine and good, but not doing the best thing possible with the ‘saved’ money is a big no-no.  The entire reason for cutting expenses is to use that money for saving and investing (or paying off debt quicker).  Personally, I’m still on the point of paying off debt and am doing a pretty decent job, but as of late, motivation and impulse buys have been a slight distraction for me.  If I see that I am getting distracted, I must seek motivation.  This motivation reminds me of my goals and that I need to act now in order to meet them.  The motivation that I use is reading blog posts & articles, and listening to podcasts that give ideas, advice or basically reinforce what I’m doing.  Simply reading about or hearing about what others are doing or have done gets me pumped up to do the next step and get back on what is going to be a long road to my goal of ‘retiring’ around 48 years of age.

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What’s working against you?

Change Anything: Blind and Outnumbered
http://youtu.be/3rj4pMdCosI

Everything in the world is hoping to part you from your money!

  1. Just a sample
    Sampling something before you buy.  How many times have you been in the grocery store and gotten a sliver of a pizza slice or a few of the newest chips handed to you or some other goody, then picked up one of the stack of product sitting next to the person handing it out?  You were just a victim of the free sample.- THE ALTERNATIVE –
    Pass up the sample or take the sample and don’t feel obligated to buy.  They’re giving it away!
  2. What’s personal finance?
    Tracking expenses, keeping a budget, and keeping your personal financial wits about you is not complex or complicated.  In order to survive, you need to do it and stick to it.  These basic skills are unfortunately deeply lacking in the general population.  People not knowing the basics of personal finance is at least part of the reason why the country has a debt problem :/- THE ALTERNATIVE –
    Find out about and know personal finance.  Keep track of your spending and keep a budget.  Set limits and stick to them.  Keep yourself and others accountable.
  3. Keepin’ up with the Jones’
    This is a two-for.  Peer pressure and bad examples.  Bob down the street just got a shiny new car, now your few year old car is ‘old’.  Time to upgrade!  Bob’s also got a new computer that takes 10 seconds to start!  Yours takes a whole 30 seconds!!  Time to upgrade!  Jack next door just got an awesome new home addition!  Now you’ve gotta build one at least as good!
    Hold on!  Cool it!  Wait up! … Guess what Bob and Jack also have now?!?  $30k in debt that’s going to take years to pay off as well as tens of thousands of dollars in interest!  Do you want that?????  Didn’t think so.- THE ALTERNATIVE –
    Maybe get different friends?  Look at Bob or Jack’s new stuff and ask yourself (or even them) how long is it going to take them to pay that off?  What opportunity cost is there?  How could the money have been better spent?  Perhaps a nice $10k gently used car and $10k into the Freedom/FIRE fund?  Perhaps get rid of a few things so that your space is more spacious?  Point these things out to Bob and Jack.  Maybe it will help them in the future 😉
  4. My money is plastic
    If you’re not very, very careful, spending with credit can really come back to haunt you.  Until you become disciplined enough to use credit (or even a debit card), don’t use one.  Believe me, I know.  I did it…twice!  I’m still paying back for my past mistakes.  If you do get into trouble, it’s an emergency!!  Tackle the debt with the highest interest rate first.  I’ll have another post on my troubles with this later.- THE ALTERNATIVE –
    Yes, I somewhat already answered this, but this is a biggie with me.  Be accountable to yourself and others, especially a spouse.  Admit if you have difficulties or simply be transparent with your personal finances.  Cut the plastic up and throw it out.  Use cash only if you need to.  I feel that I would now be disciplined enough to be able to use a credit card properly, but I would only want a joint card with my spouse and complete transparency.  I would refuse to carry a balance month-to-month.  Paying 12-24% interest or more on any amount of money is simply asinine and asking for trouble.
  5. Advertisements work!
    It seems that just about everything out there is an ad in one way or another.  You are being sold to at all times.  Ads are everywhere; keep that in mind at all times…CONSTANTLY!  You are being sold to right now by something or someone.  In reality, TV shows are just ‘filler’ for ad spots.  How does the almighty Google make it’s money? Ads.  There is likely an ad right under this posting (I have no control over that at this time – feel free to donate).- THE ALTERNATIVE –
    Ignore the ads as much as possible.  Notice the small “ADVERTISEMENT” at the top of magazine ‘articles’.  Turn off the TV and/or pay for ad-free stuff on Netflix, Hulu, Amazon or other such services.  I can all but guarantee that it will save you and your family more than the cost of the service in even a short time frame.

In marketing classes, all of these ways and more are plainly spelled out.  It is up to you yourself to know and keep these things in mind.  If you are aware of them and actively avoid or turn them into forces in your favor, they can be overcome.

Mindset, Outlook and Happiness

I watched a couple of documentary movies this weekend (a favorite hobby of mine). I watched them on Netflix or Amazon. The first one is a bit of off the beaten path type of thinking that seemed to work for those that were doing it:

Tiny: A Story About Living Small
– the movie’s site: http://tiny-themovie.com/
– on IMDB: http://www.imdb.com/title/tt2450264/

A similar movie: http://topdocumentaryfilms.com/we-the-tiny-house-people/

The other movie that I took in was called Happy. I thought that it was interesting and showed people that were living happy, fulfilling lives in varying circumstances along with accompanying research on living a more happy and fulfilling life. One example given in the movie was a man living in slums in India and another was an entire relatively poor yet very happy family living in Louisiana. Both examples made it clear that a good balance in life is very important to happiness, but mindset and outlook are important pieces as well.

Happy
– movie’s site: http://www.thehappymovie.com/
– on IMDB: http://www.imdb.com/title/tt1613092/?ref_=fn_al_tt_2
– watch free if you have Amazon Prime:http://www.amazon.com/gp/product/B007BECIVC/

Are there any movies or other media that you would suggest that could be wrapped into the theme of mindset, outlook, optimism, or happiness?

 

PS: While I’m on the topic, I’ll add a bit of love from Mr. Money Mustache:

The power of $3 or $4 a day

Many people spend at lest $3 a day on consumables such as coffee, snacks, and other things that they really could otherwise do without or incorporate a much less expensive alternative.

Doing this is costing these people TONS of money!  This totals to about $1500 a year to be exact!  $15,460 over ten years if the money were invested instead.

Here’s the simple math:

$3 x 365.25 = $1095.75 x 10 years = $10,957.50

If the money were invested and getting a very conservative return of 6% annually, compounded monthly, the total would be $15,460.  $4 per day makes it just over $20,000!

If this doesn’t make you think twice about those coffees or snacks or some useless $3 item, I don’t know what will.

Additional Calculations

After the 10 years of investing $4 a day, you can spend $2.20 a day forever from the interest gained on the investment! I haven’t done the calculation, but I’d guess that after a total of 15-17 years, you could spend $4 a day!

On Minimalism

Currently, I am not what I would call am minimalist.  I do like to think that way, but personally and as a family, far too much stuff is contained within the walls of our house (and outside of it).  Much of the ‘stuff’ is my own, much of it is the family’s, much of it is toys, much of it is simply stuff we rarely, if ever use.

Yesterday, I began to pare down my work / dress shirts.  I removed about ten shirts from the ranks along with at least two sweaters.  I have far too many.  I will continue remove shirts from my closet until I could fit my pants and shirts on one section.  Currently, only the shirts very tightly fitting in one approximately three to four foot section with a few shirts being excluded.  The pants hang in the section below.

I will do the same with my beloved t-shirts as well.  Two plus drawers full are more than enough to wear.  I can’t wear them at work (though I do typically wear one under my work shirt).  The main times that I wear t-shirts are occasionally after work and on the weekends.  If I were to guess at the number of shirts that I currently own, I’d say that it’s somewhere in the neighborhood of at least 50-75.  That is simply far too many.  I’d like to whittle it down to maybe 40.  In my defense, I do typically wear two shirts at a time, so that allows for a few more shirts than what one may typically own.  I used to wear nearly exclusively size large shirts, but now prefer a medium, though a small can fit slightly snugly.

Before all of this on the list would be to decrease the number of Magic cards that I own.  That will be an ongoing item on my list to decrease the number of items that I own (currently in the ballpark of 150,000 – 200,000+).

Another similar thing would be books.  I have many, many books and could likely stand to get rid of several of them.  I don’t know the best way to do this as I don’t really just want to recycle them as paper products.  Of the books that I own, many are textbooks, but are likely far beyond any usefulness to current students.  I do like to keep them around for reference, but I have obviously not touched them in a long time and the internet is a fine reference, so the books are left untouched.

The last big thing on the list is computer related items.  I have several computer cases (with and without the ‘guts’ of computers inside.  I also have several other computer components and related computer stuff strewn about.  I did do a massive computer recycling before moving from our old house about a year ago, but I still held onto several things and have accumulated one or two additional computers since then.  I may take the time to revamp one or two of the computers, but doing so may not be worth the effort.  I should simply take in at least one new round of computer recycling stuff to get rid of most of the items.  I can do that at any time, so this would be the easiest and quickest way to free up space and decrease clutter.  I think that this will be the next area to tackle after the closet.

The plan

I have plans and spreadsheets!

In short, my plan is to begin saving $26,500 per year beginning in January of 2015 (roughly $2,210 per month).  This will be done in order to save just about $600k to live off of the interest.  I have worked out the time frame to do this starting from zero to starting with $50k already invested.  Starting from zero, the $600k date is end of month (eom) June 2028; starting with $10k = eom Feb. 2028; starting $30k = eom May 2027; $50k = eom Sept. 2026.  What I already have saved for ‘retirement’ is in my 401(k), life insurance, a slight pension, and physical items, so the theoretical $50k based upon those ‘investments’ should actually be a pretty conservative figure.

I have a present, mid-term, and future household budgets worked out, but need to tighten up the numbers quite a bit in order to hit the goal of saving $2210 per month (I’m currently about $440 short on the mid-term budget! [based upon a 40% savings rate = $2330 in savings per month from all savings sources]).  In order to do this, I need to get a slightly better handle of where our money is going and how to decrease the expenses that we currently have.  The assumptions that would change in our present and mid-term budgets are a decrease in the phone bill ($120 to $65), our van will be paid off in Aug. 2014 ($478 to $0), groceries will decrease a bit ($546 to $425), and the internet/cable bill has decreased ($78 to $59 – eliminated cable).  All of the outlined decreases will go into savings/investing ($673 per month).

This is merely the beginning.  I will continue to plan more and learn more as I go forward.