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Get Rich(er)

Get Rich(er)

Get Rich(er)

    It is true that no one can serve two masters, and slavish devotion to unrighteous mammon is indeed a road to misery.  Ambition to produce and “be rich” is not necessarily a bad thing, though.  And if you’re reading this, you’re likely among the richest 1-2% of people who have ever lived.  Historically speaking, you’re not just rich.  You’re super-rich.

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    This means a couple of things.  First, it means that foregoing generations have left us with the capital, technology, and institutions we need to produce staggering amounts of wealth (which isn’t just “stuff;” wealth is whatever people value).  They have done this by establishing legal systems conducive to trade, by establishing an ethic of inquiry, and by refraining from consumption so as to leave us with plenty of resources that we can use to produce current and future output.  How, then, in this environment, should one grow wealthy?  And what are the social implications?  Here, I will relay some of the best advice I have gotten and discuss some of the social implicaitons of “getting rich.”  First, here’s how to do it:

    1.  Stop renting and buy a house. Homeowners build equity while renters line their landlords’ pockets.  This require a few important caveats.  First, don’t buy a house you can’t afford by agreeing to terms you can’t meet embedded in a mortgage you don’t understand.  Second, it is better to rent than to buy if you are only going to be somewhere for a very short period of time.  We bought our first house about a year ago, and we bought conservatively: we bought in a nice, semi-urban neighborhood based on the assumption that we would have to pay for the house on a single income.  We’re happy, we’re building equity, and we aren’t over-extended (yet–we have a six-week-old!!).

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    2.  Step away from the latte. The Automatic Millionaire author David Bach refers to what he calls “the latte factor,” which consists of the money we spend on small, incidental purchases: a $3 latte here, a $15 lunch there.  It all adds up.  Of course, there is something to be said for having your morning coffee, and for some of us, it is more efficient to get our fix from Starbucks.  A first step might be to size down–Starbucks does sell a “short,” though it isn’t on the menu–or to go with a regular coffee that costs $2 rather than a $4-5 specialty drink.

    3.  If you’re being paid $50,000, do $55,000 worth of work. One of the best ways to ensure job security is not to do the bare minimum necessary to get by, but to do enough that you are competitive for another job.  In academia, our brass ring is tenure, which gives us wide-ranging freedom to explore the world of ideas.  Last summer, I heard it put this way: “don’t worry about being competitive for tenure.  Worry about staying marketable.”  If you’re marketable–and you may be perfectly content wherever you are–then you shouldn’t have to worry too much about job security.

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    4.  Save. If you aren’t contributing to your 401k or your 403b and you don’t have an excellent reason not to (we didn’t during my first year at Rhodes because we were saving cash to buy a house), you’re throwing money away.  A Roth IRA is a fantastic deal if you’re young, and a 401k can reduce your tax liability considerably while giving you room to grow your capital in the future.

    5.  Bank the raises. What do you do with those little boosts to your income?  Do they go straight down the drain on a bunch of stuff you don’t need?  Or do you put them in the bank?  We have a system that has worked reasonably well in our house.  Whenever, we get unexpected shocks to our income, we split it four ways.  The bank gets 25%, the kids get 25%, my wife gets 25%, and I get 25%.  This has proven to be a somewhat reasonable and easy way to splurge every so often while making sure that we are wise stewards of what has been entrusted to us.

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    6.  Be a cheapskate. This is something we have some trouble with.  When your income goes up, it’s fine to splurge a little.  My wife and I both have iPods, and we have a nice TV.  However, we had one car for our first four years of marriage, and we bought a deeply-used second car last summer from a Rhodes graduate who was advertising it on Craigslist.  We’ve never had cable, we just switched from cable internet to AT&T (slightly slower, much cheaper), and we try to take advantage of cheap entertainment (our church library, for example, has a ton of stuff).

    7.  Go with equities if you’re young. The younger you are, the better it is to invest in stocks because you have plenty of time to take higher volatility in exchange for higher returns.  As you get older, you will want to make your portfolio more conservative, but now is the time to take on risk.  Even in the current crisis, there is reason for optimism because it’s a great time to buy.  After you’ve salted away two or three months’ income in order to deal with unanticipated emergencies–like the new kitchen floor we had to get last month–you should begin investing in equity-heavy mutual funds.  Many companies offer funds that rebalance toward greater conservatism over time, substituting bonds and safer securities as you approach retirement.

    8.  Get educated. The market is screaming “stay in school!”  Wages for low-skilled occupations have stayed flat while wages for high-skill, high-tech occupations have risen dramatically.  If you’re serious about it, college is a great investment.  Strange as it may sound, the increasing cost of college is another reason to be optimistic.  Higher costs for higher education suggest increasing productivity in other sectors as well as general expectations that there are great opportunities in the future for the educated.

    9.  Be generous. Finally, it is important to remember all the cliches about wealth.  All that glitters is not gold.  George Bailey was the richest man in Bedford Falls.  It doesn’t profit a man to gain the world and yet lose his soul.  Ebenezer Scrooge, for all his wealth (which produced higher incomes for many people, by the way), appears to have had a miserable and wretched life.  Money cannot buy happiness or love, but it can buy a lot of things that contribute to happiness–such as the ability to help people who truly need it.

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    Published on November 20, 2018

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

    Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

    In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

    Why Your Past Prevents You from Saving Money

    Are you constantly thinking about your financial mistakes?

    If so, these thoughts are holding you back from saving.

    I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

    It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

    For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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    How to Effortlessly Track Your Spending

    Stop manually tracking your spending.

    Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

    When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

    Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

    The Truth on Why You Keep Failing

    Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

    Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

    Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

    If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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    Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

    Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

    1. Save more than 50% of your available money (after expenses)
    2. Only buy nice things after saving
    3. Automate your savings with automatic bank transfers

    These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

    How to Foolproof Yourself out of Debt

    Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

    So how can you separate yourself from the 60%?

    By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

    This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

    For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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    Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

    A Proven Formula to Skyrocket Your Savings

    Having proven systems in place to help you save more is important, but they’re not the best way to save money.

    You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

    What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

    Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

    Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

    During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

    Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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    Transform Yourself into a Saving Money Machine

    Saving money isn’t complicated but it’s one of the hardest things you’ll do.

    By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

    The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

    Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

    Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

    What are you waiting for? Go and start saving money, the sky is your limit.

    Featured photo credit: rawpixel via unsplash.com

    Reference

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