Posts Tagged ‘investment’

In part one I talked about measuring wealth in time and freedom. In part two I will be discussing 5 ways to get started. As a quick note, I would like to mention I wrote this post on my itouch while commuting on the Tokyo metro.

1. Assess your bills and eliminate

Learn to live with less. Look over your expenses and eliminate anything that is not a necessity. When you think necessity, think stranded on an island and what you need to survive. You can always add things back later, but after some time without most things you will find they really aren’t that important.

2. Use cash/get rid of credit cards

Some people might disagree with this so let me explain. Credit cards allow you to spend money you don’t have. Stop carrying them with you. Set a monthly budget including lunch, gas, and spending money. Pull this amount out and don’t go over it. If it helps, only keep the daily amount in your pocket.

3. Create a want/dream list

Figuring out what you want and how much it costs will not only help you set some saving goals and focus your efforts, it also brings to light the things you purchase that aren’t important. Check out The Four Hour work Week for a dreamline template.

4. Make your money make money

There are a lot of things to invest in. Find something that interests you and learn about it. Talk to successful people who are investing in the fields you are interested in and learn from them. And don’t forget, one the best investments you can make is in yourself and your own education

5. Find cheap fun

Learn to enjoy life and have fun without spending money. You can find one list on cheap fun here. But don’t limit yourself to that list. Find something you enjoy and then find a way to do it cheaply. Or better yet get paid for it.

Sit back and watch your money grow! It seems difficult at first, but after you do it for a month then it gets much easier…and eventually fun.

The simple answer…..Maybe. It really depends on your situation. Those who have no debt should be saving as much as possible, and the younger you are the more aggressive your investments should be. The reason is that you have many years to make up for down years.

For those of you who have debt, then you should only be saving if you can make a better rate on investing than you are paying in interest. If you are making less in your investment than interest, then your investment is costing you money. Especially for those who are just putting money into savings accounts. This seems simple, but a lot of people are doing exactly this. I think it is smart to keep a small amount of money saved for emergencies, but besides this, it is usually best to pay off your debt before investing. That is especially true for credit card debt where the interest may be around 20%.

Below I have done a few calculations to show exactly how much you are loosing if you are putting money in savings with debt. I have used the amount of $10,000, and the difference will be even great the more money you have saved.

Savings account

Principle= $10,000

Interest=$3%

Time=1 year compounded monthly

Value in 1 year=$10,304.16

Debt

6%=$10,616.78

Total investment= -$314.62

10%=$11,047.13

Total investment=-742.97

19%=$12,074.51

Total investment=-$1,770.35

So as you can see, the higher the interest rate the worse off you are to put money in savings. The only case where this would not be true is if you can make a higher rate than what you are paying on your debt. The ability to do this is more difficult the higher the interest rate you are paying for your debt.