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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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    Art Carden

    Art Carden is an Assistant Professor of Economics and Business at Rhodes College in Memphis, Tennessee.

    A Review of the Book “The Art of Learning” 21st Century Opportunities Learning from A Master: Review of “Bear Bryant, CEO” On “The Substance of Style” Productivity Hints from Booker T. Washington

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    Published on January 8, 2021

    How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

    How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

    Ever wondered whether your credit card debt is the reason you’re in a bad financial situation? You can’t enjoy any fun activities because a good chunk of your money goes toward debt payment. Heck, you’re even behind on some of your monthly bills.

    The effects of clumsy debt management are too many to list here. This guide is going to help you discover how to pay off credit card debt fast and start chasing your financial goals.

    Debt problems are the last thing anyone wants to encounter. But things can get out of hand when all the “little debts” you take accumulate in interests.

    What if you knew some simple and proven ways to be debt-free quickly? Implementing them would mean better financial health for you. It becomes possible to free up cash for your “wants.” These include taking a trip or buying something you’ve always desired. All that while paying your bills on time!

    Let’s not wait any longer. Here are 7 powerful tips for paying off credit card debt fast:

    1. Pay More Than the Minimum Credit Card Payments

    Many people only pay the monthly minimum on their credit cards. Truly, that’s the right amount for staying on good terms with your credit card company. But you need a different approach if you’re looking to achieve financial independence within a short time.[1]

    Most of your payments go toward interest costs when you only pay the minimum amount. A substantial sum of your balance remains standing. As a result, it becomes more expensive to eliminate your debts.

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    You don’t want to wait more than 10 years to get rid of debt while it’s possible to do it sooner. All you have to do is double that $100 minimum payment to $200 or go higher.

    The good thing is that minimum credit card payments are affordable in most cases. By paying a higher amount, you reduce your interest costs, lessen your borrowing period, and boost your credit score.

    2. Start With High-Interest Credit Card Debt

    If you have more than one credit card debt, prioritize putting the extra money toward the ones with the highest interests. This debt pay-off strategy, known as the debt avalanche method, is essential for being debt-free quickly.[2]

    First, you need to list down all the credit card debts you have in the order of their interest rates. Next, you choose the one with the highest interest and pay a significant amount toward it each month. It can be an amount twice or even thrice larger than the minimum payment.

    At the same time, you make monthly minimum payments on the other debts. Their interest charges won’t be as costly as that of the first debt on your list. You only move on to the next high-interest debt after the first one is gone. Remember that your focus is on the interest rates and not the balances.

    3. Revisit Your Budget

    Budgeting is useful for tracking your financial moves. Once you create a budget, some tweaks along the way can make it work for you better. One situation that requires you to revisit your budget is when you’re struggling with debts. It might hurt a bit to slash some expenses. But you also don’t want to miss out on achieving financial freedom in the long run.

    You can reduce some variable expenses to free up more cash for credit card debt payments. They’re the ones that change from time to time. Some examples are groceries, fuel, and clothing.

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    Other opportunities for cutting down your spending lie in non-essential expenses. Instead of dining out all the time, you can cook at home more to save money. You can also share some subscriptions with friends and pay a fraction of the cost.

    If you’re determined enough, you can eliminate all your unnecessary expenses and focus on paying off your credit card debt first.

    4. Avoid Using Your Credit Cards

    Do you want to know how to pay off credit card debt with a low income? One simple way is to stop using them. Having your credit cards everywhere you go means that you’ll be more tempted to buy unnecessary stuff. In this case, you spend money that you don’t really own and get deeper into debt.

    The quickest fix to stop the debt build-up is spending with cash. You’ll be more aware of everything you can afford at any particular time. If you decide to keep one or two cards to ease the transition, always make wise choices. For instance, only use them when experiencing financial difficulties.

    It’s best to categorize your fun activities under “discretionary spending” in your budget. This way, you won’t need more debt to kill your boredom. By halting your credit debt from accumulating, it’s easy to pay down what you already owe and be happy with the progress.

    5. Start a Side Hustle to Boost Your Income

    You’re probably turning away a lot of money by not monetizing your skills. Everyone has something that they’re good at doing. And you can use that to generate extra income for attacking your credit card debt.

    If you look around your neighborhood, you can find several side hustle opportunities. It can be pet sitting, tutoring, or lawn mowing. You can start an online business by offering services such as digital marketing, content creation, and web development. Such skills go in high demand on freelance sites and job boards.

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    Finding clients on social media is also a good strategy to utilize your skills and make more money. Facebook groups, Quora Spaces, and subreddits are some places to look for side jobs. You only have to join a niche-specific platform, share your services, and respond to any opportunities.

    It’s possible to learn a skill, practice it, and earn from it. Use the free resources online or purchase some e-courses to get started.

    6. Sell Your Used Items for Extra Cash

    Starting a side hustle isn’t the only way to generate extra money. You can turn unwanted items into cash for paying off credit card debt. Whether it’s an old TV, book, or furniture, there is always someone itching to buy your used stuff.

    A garage sale, as much as it’s old-fashioned, is perfect for getting your neighbors and passers-by to buy from you. You keep all the money because there are no business permits or taxes involved. While you may not make much cash, it’s better than leaving your stuff to go defunct in your storage.

    Other than that, you can sell your used stuff on online marketplaces. Facebook groups are great places to start if you want quick approvals and hence sales. You only have to ensure that your listing follows Facebook’s commerce policies.

    When selling any pre-owned items online, ensure they’re in good shape to avoid problems with your buyers.

    7. Know When to Seek Help With Your Debt

    Asking for help with your credit card debt can be challenging to do. But letting it drown you is a road you don’t want to take. While you may feel embarrassed at first, it’s the best way to get back on track when you run out of options.

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    There are tons of non-profit credit counseling organizations that can offer you free guidance on how to escape the debt trap. An example is The National Foundation for Credit Counseling. They simply review your finances and help you determine the source of your financial problems. After that, they match you with an actionable debt management solution.[3]

    In extreme cases, the debt solution can be:

    • Debt relief – where your debt is partially or wholly forgiven
    • Debt consolidation – taking out one loan to repay others
    • Debt settlement – the creditor forgives a significant portion of your debt
    • Bankruptcy – legal process for seeking relief from some or all your debts

    It’s necessary to carefully weigh your options before deciding on the way to go. Find out how it might affect your credit score and any other risks.

    Wrapping It Up

    Debt is a major setback when you’re trying to prosper in life. Paying off credit card debt is essential if you want to reach your financial goals. That means having more free income, a good credit card score, and even a chance to retire early. You become more productive each day because of the peace in your mind.

    So, you now have some tips on how to pay off credit fast. Go ahead and get rid of that good life progress killer!

    More Tips on How to Pay Off Debt

    Featured photo credit: rupixen.com via unsplash.com

    Reference

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