The so-called “rich people” in my life don’t carry around big bags of money or wear monocles. One thing that sets them apart? How they spend. Our resources actually allow us to live more cheaply and avoid more pitfalls.
Want content like this in your inbox each week? Leave your email here.
You may know already: we generally advocate simplicity in most things. Once our basic needs are met, we’ve got some choices to make. So how do we keep things simple?
When it comes to budgeting, this takes the form of “paying yourself first.” You save and invest to meet your goals, and then spend the rest as you see fit. No need to track every nickel; you will get where you want to go so long as you’re getting yourself paid.
But it doesn’t hurt to also review your outlays in greater detail once in a while. Fixed expenses are those that cannot be changed in the short run: if you don’t pay the electric bill, the company will shut off your power. You have to pay the bills. Total up these kinds of items. You’ll need to know what sort of fixed expenses you can expect each month in order to figure out how much is discretionary—what’s left over for the things you want?
This exercise can be useful because it may point you to those expenses that are regular but are not fixed. For some, it might be a gym membership that doesn’t get used. It might be a streaming subscription for shows you don’t watch anymore. These services are just a few examples: there are plenty of things in life that we try out or that once made sense but no longer serve us.
And when we root these things out, it’s like giving yourself a raise!
We each have long-standing habits or hobbies whose costs we may not have considered for quite some time. Taking a fresh look at our spending gives us a chance to make intentional choices about how we live, going forward:
And the big question: what would you have to change in order to afford that new choice?
This isn’t necessarily “just” a budgeting question, because rather than shift your spending around, you might elect to invest more each month. All else being equal, investing more means you reach financial independence sooner. Access to options: that’s what we’re buying when we pay ourselves first.
We don’t mean to make any of this prescriptive. After all, you are the one who must live your life—not us! We just suggest that taking a step back to look at where our money goes, being intentional about how we spend, these are things that come naturally when we try to live life on purpose.
Clients, if you would like to talk about this or anything else, please email us or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
Numbers on a screen are never the whole story: how does your money move, and how does that align with what you’re trying to do in your life?
Want content like this in your inbox each week? Leave your email here.
At 228 Main, we like to think about the many ways one might be rich. The primary task here is to work to grow your buckets, especially those long-term buckets that may serve you across many years.
Many of our clients, however, are also rich in another precious resource: time.
Just as a company may pay dividends to shareholders, the best investors seem to have a knack for finding those investments of time that pay dividends. And paying attention to our time could mean big things for our financial goals and wellbeing, after all.
Take a closer look at a day or a week in your life and how the hours go by. Is there a set place or routine for those things that may seem to eat up “too much time,” like bills or errands or banking or emails?
Activities like these can really frazzle a person, but when we zoom out, a lot them of them shouldn’t come as a surprise. These are everyday, regular activities.
Laura Vanderkam’s book Off the Clock explores our many approaches to the time we have—the skillful and less skillful ways we spend it! She’s got a system for reviewing our time:
“When you do an activity, ask yourself two questions: Will I ever do this again? If so, is there some system I could develop or something I could do now that would make future instances faster or easier?”
The good news is that there are plenty of ways that small interventions—just one little step, now!—can pay time dividends for weeks, months, or years into the future.
Some of our favorites include automatic deductions: monthly payments to take care of any outstanding debt, investment contributions, and retirement contributions. (“Set it and forget it” is a phrase you might hear for this strategy, although we prefer a more mindful approach!)
We are also big fans of quarterly reviews. It’s roughly how often we adjust portfolios, but the passing of the seasons is a wonderful excuse to think about the state of our goals and the bigger vision.
What else can you attach to the schedule? Could you leave yourself notes for things you’d like to review on your birthday, at the new year, before or after tax season, the start or end of an academic year?
A company may divvy up its profits to splash them around to shareholders on a regular basis, but as individuals we too might find those ways to get our time to pay us back later. It just takes a little forethought now.
Clients, want to talk about this or anything else? Call or write, anytime.
Investing includes risks, including fluctuating prices and loss of principal.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
Remember Rich Uncle Pennybags? He’s the mascot from Monopoly. Top hat, monocle, sacks of cash. As kids, he might have been the cartoonish dream for some of us, the ultimate image of what “rich” looks like.
Obviously the reality is different, and our dreams mature as we do. Clients, in our conversations with you, it doesn’t seem like his life or image is the one you’re pining for.
But there is one surprising realization about the life of the “rich”: it is usually much, much less expensive to be rich than to be poor.
Why? Having money enables us to live more efficiently and avoid many painful financial pitfalls.
To begin with, credit may sound like a bargain—after all, you’re getting more money now than you otherwise could spend! But there really isn’t any such thing as “cheap credit.” If you are able to lay down cash for major purchases, you don’t just save on fees and interest: you may even be able to negotiate a better price.
If you are funding large items on a credit card, you are likely to wind up paying many times what they are worth. If you find yourself in a spot where you need to turn to high-risk credit in the form of payday loans, things get even worse.
There are other ways that having money allows you to stretch your resources out, too. Buying quality merchandise may take more money up front, but the alternative is buying shoddy products: if you find cheap furniture that falls apart every year or two, you’re still paying to replace pieces more often. You may save money in the long run by paying more up front. (Of course, care must still be taken to select your purchases carefully: higher cost does not always correlate to higher quality!)
Also, when you have a life of plenty you have the luxury of being able to shop around and wait for a better price. The rich get to be rich in time, too. Be a little choosy, not cheap.
These habits are ones that all of us can use to help us build and maintain our own wealth.
The wonderful conundrum that some have discovered is this: the less you spend, the more wealth you accrue; the more wealth you have, the less you need to spend.
Clients, write or call when you’d like to talk about what this means for you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
In the spring, we checked in with friends and family as work and school and much of life was in upheaval. Some folks were struggling more than others. We talked with one friend who sat through meetings in the office about how the switch to remote work was going to be handled when (not if) the team went that direction.
“I heard what they were saying, but I didn’t believe it,” our friend said. Within days, the team was out of the office. The friend was home three weeks before it finally sank in: work had gone remote.
Have you ever felt that way? Like your body has moved somewhere but your mind is refusing to catch up?
“It just feels like I’m waiting for Monday, like we’ll be back any day now,” the friend said.
The shock of change can have lots of effects on us, and we do not fault anyone going through this thought process. It made us wonder, though… What is the pandemic teaching us about time horizons?
You’ve heard this from us before: “long-term investing” is a little redundant. as we believe better chances for success lie in longer time horizons. It’s easy to outperform a strategy for short-term goals if you’re playing the long game.
2020 has been a months-long lesson in this perspective, hasn’t it? As spring turned to summer, a lot of folks had to come to grips with the idea that we could be in this situation for a while.
We are all about taking things one at a time, about taking life one day at a time—but how would our day-to-day change if we were geared toward the long term?
“I could be here a while…”
How could that phrase change your home life? Your retirement goals? Where you want to wake up each day? Your grocery and shopping routines?
Clients, what a time of change and reckoning we’re living through. But we’d like to help you do just that: live through it. Live in it.
When you’d like to talk about this or anything else, please write or call.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Once upon a time, a colorful character roamed the streets of our village, loudly proclaiming an unusual philosophy of money and wealth. “If you have a nickel in your pocket, that’s too much. You better spend it on something so you won’t have to worry about it any more.”
This fellow always paid his bills, raised a wonderful family, and left a legacy of love and service that lives on in his children, grandchildren, and great-grandchildren. All who knew him (and everyone knew him) remember his joy and his generosity.
Without judging that philosophy, it is easy to see the benefit of combining a longer-term focus with the idea of enjoying the moments and days as they come. (Even this interesting old friend earned a secure retirement sufficient for his needs.)
Talking with clients over the past few weeks as we deal with the COVID-19 pandemic, the difference made by having some resources is astonishing.
Money makes no one immune to disease. But those who have it have options that those without it do not. Before the virus showed up, we understood that money is awfully handy.
Clients, if you would like to talk about this or anything else, please email us or call.
This project is rewarding, from our perspective. We are crowd-sourcing the topics for these letters to our children about money and life. Your response has been terrific.
A wise person among you suggested ‘enjoy the journey’ is key. It makes sense to talk about this early in our series, since it has everything to do with how we go about life. The implication is that the journey, not the destination, is the important part.
When you think about it, arrival at a destination (or achievement of a goal) is a temporary thing. Once the goal or destination is reached, you’re there. Then what? A new goal, a new destination. We spend far more of our days on the way than in actually arriving.
In financial terms, the satisfaction of saving something every payday is a way to enjoy the journey. The destination, perhaps a pot of wealth big enough to retire on, is a long way off during the early and middle phases of your career. It is hard to focus on a destination that may be decades away. It’s much easier to get in the habit of enjoying small steps along the way – the journey.
Recently, in the security screening line at the airport, a fellow traveler in an adjacent line loudly inquired why the conveyer belt on the baggage scanner up ahead was stopped. The identification checker replied they did not know. “Well, don’t you think you better go find out?” Of course, the belt frequently stops when additional scrutiny of an item is needed.
The traveler immediately in front of me got to the identification checker, who asked “How are you today?” The fellow quietly replied, “Terrific. I’m grateful I’m not THAT guy,” nodding toward the foot-tapping, sighing, unhappy person. All within earshot were smiling; the dyspeptic was unconscious of his role in the conversation.
This vignette is a case study in literally enjoying the journey—or not. It’s about making the most of where you are, what you are doing, who you are with.
Our focus in this series will be more on the process, the getting there, the journey, not checklists of goals one ‘should’ accomplish. We believe this is the happier path.
If you have questions about this or anything else, or more topic suggestions for this series, please email us or call.
You must be logged in to post a comment.