What does it mean to "find" money you already have? For the most part, it means saving and budgeting. These are two different skills that you can develop. And you can see results immediately.
I love the book, The Millionaire Next Door by Thomas J. Stanley and William D. Danko. I wish someone would produce an updated version with current statistics. The content is still 100% awesome, but the time-bound stats are a little old. Anyway, go get that book and read it.
Yesterday I posted about how I manage to run a couple of successful businesses and travel all the time. One key piece of that is straight out of The Millionaire Next Door: I drive a used car. I have purchased three cars in the last twenty years: 1997, 2006, and 2014. Obviously, I place a higher value on something other than driving a new car. As a result, I have spent much of the last twenty years with no car payment.
Everyone is different. You might want the security of always having a car payment because that really represents having a car that's extremely reliable and has lower ongoing maintenance costs. Everyone has to choose their level of comfort.
But imagine keeping your car for ten years instead of two or three or five. Just for argument's sake, let's say you bought a nice little $25,000 car today and took out a five year loan. At 3% interest, you'll pay about $450 per month for 60 months. Now imagine NOT paying $450 per month for the 60 months after that. Today's cars should easily continue to be reliable for that long (especially Hondas, Hyundais, and that class of cars).
$450 per month times 60 months is $27,000. If you don't spend it, that's $27,000 you can put straight into investments.
There's a human tendency to spend money up to the limits of our income. You have to break out of that pattern. It takes willpower and a sincere belief that the payoff in the future is worthwhile.
When my daughter was younger I always used to tell her, "Every dollar I spend today is three dollars I won't have in retirement." And it's absolutely true. And as you get old, that ratio changes dramatically. Today I would have to say it's two dollars I won't have in retirement. In another five years it will be $1.50 and then $1.25.
Long Term and Short Term Savings
You can think of savings as being either long-term or short-term. Committing to driving a used car is a long-term commitment. You might even drive the same car for fifteen or twenty years. At some point maintenance will increase. But it will never add up to $9,000 per year.
Short-term savings are even larger in the long run! Nowadays $100 doesn't go as far as it used to. Dinner at a not-so-fancy restaurant can easily add up to $50 for two people. And at some places the same meal might be $100 for two people. That difference ($50) once a week adds up to $2,600 per year.
Now take a look at $25 shirts instead of $50 shirts. And $60 shoes instead of $120 shoes.
It adds up everywhere. So far, NOTHING I've mentioned will change your lifestyle. None of it will make you look poor or "unsuccessful" in others' eyes.
I guarantee you can save $100 this week by simply buying the same things at different stores (restaurants, etc.). Do that for a week. Take the extra $100 or $200 or whatever and stick it in the brokerage account.
You also have to be strategic about savings. When we sell a printer to a client, we give them estimated costs per month and estimated costs per copy. Toner prices can vary dramatically. Some clients will take a slightly slower printer because the cost per copy is lower. Others need speed.
We all know clients and prospects who are tempted to always spend less money. Very often we know they are going to pay more in the long run. But we can't convince them of that.
I like to tell people, Make sure you're pinching the right pennies!
You need to do this in your business and your personal life as well. Be strategic. Save money where it will truly make a difference in the long run. Spend money today if it means lower costs overall. That means you have to take the time to make these calculations.
Eventually, you will build for yourself an overall lower cost of operating and a lower cost of living. Now don't spend it!!! Set your expenses and don't let them rise to take up all the money that's available. Sock that money away.
Do it. Right now. Go find an extra $100 or $200 or whatever and stick it in the brokerage account. I'm not kidding.
If you tell me you can't, you are almost certainly fooling yourself.
But you're not fooling me.
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Last time, I asked you to set up an Automatic Investment Transfer to your investment account. If you haven't done that, do it now. No one will do this for you. Once that's set up, you need to make sure the money's there. This week, make sure that money's always there. Begin building that habit.
Everyone reading this can do something. $5, $10, $100. Something.
Every dollar counts.
Move somethig into the investment account.
If the money's in your pocket, you'll spend it. Get it over to the investment portfolio ASAP!
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Let me know how you're doing!