I love rules. In fact, the more restrictive the guidelines, the better.
It’s not that I like someone telling me no. But I just love trying to find a way around restrictions. Every time someone tells me how I’m not supposed to be able to do that, I always respond with “please tell me which rules I’ve broken”.
This time though, I don’t think I’ve just stretched a rule of the personal finance world, because I actually broke one. Not only did I buy a cup of latte, I kept buying them for the past few weeks.
Am I screwed?
I’m not sure how you would answer, but I have a sneaky suspicion that I won’t be. Yes, there are those who saved millions with an below average salary, but for everyone of those people, there are thousands more who reached their millions through a much higher income. While savings is important, generating income is still critical.
So the question you should be asking is – how do you earn more money?
This time, I won’t be giving you any suggestions (I bet you were expecting a few of the usuals right?) because you should be the one thinking about this. You don’t need someone telling you want to do, just like rules exists to be interpreted and adapted to YOUR liking. You have your unique situation, and it’s uber important for YOU to figure things out. What should you do? You should answer that yourself.
Oh and while we are at it, here are a few reasons why coffee daily will never amount to a million dollars.
- Returns – In order to get over a million dollars with your coffee fund, you have to drink a coffee costing $5 every day for 42 years, plus invest that amount and receive a 10% interest rate. Is 10% per year, every year actually realistic?
- It’s $3, not $5 – I forgot to mention that my latte cost $2.45, not $5. Opps. I just cut my latte retirement fund in half.
- Taxes – Most investments requires you to pay taxes along the way, which SEVERELY cuts into the outcome.
- Every day, Really? – Does anyone seriously have the discipline to go out and buy a cup of coffee every day for 40+ years? A few lost days per month and you aren’t getting that million.
- If you don’t get coffee, you will probably get something else – There were times when I seriously stressed myself out because I kept trying to keep myself from buying a cup of coffee. With the added tension, I bet I ate more, and wanted to buy other things just a bit more too. In one pocket and out the other.
- Go Make Some Money – Hey, a cup of coffee is $2.45. Try to find something that will make you $3 a day instead. I guarantee that you will be happier, and you can keep the extra.
Here’s a suggestion – Add this to your To-Do list tonight. “I will find three ways to increase my income”.
{ read the comments below or add one }
$30 to hire a plumber? You haven’t had to hire a plumber lately. 🙂
Oftentimes, we forget the important connection between time and money, as there are many ways that we squander time that will negatively impact our money. Since time really equates to money, then it stands to reason that if you waste time, you’re effectively wasting money. You also need to quantify all the money that you stand to lose when you don’t use your time effectively.
Great post. It is important to do something else to make more money, no just the job. It increase possibilities of reach financial freedom and improve your community. It is important to write in a paper what you want to do. Writes demand mental focus. And please eliminate the Lone Ranger Syndrome. The new entrepreneur have to ask help or guidance. Someone is in where you want to be. We teach that in our programs. Thanks for the article.
The Blue Leaf
It’s all about priority at where you are in life. For me, in my opionion since I slack off in college. Now nearing 30, and working 2 jobs it’s:
Priority List:
1. Money
2. Time
Money come 1st so that I can save it for my long-life goals which are:
Goal List:
1. Get a MBA degree in my career
2. Buy a house
3. Be financially secure
And of course, those goals will consumed most of my time, but what would you do when near retirement you have nothing to retired on?
I have achieved the degree, the career and the house (and the family) – its the financial security and being near to retirement which is the problem at my near-to-retirement age and is just as you suggest. For various reasons, financial security along the way could not be assurred in my younger years. Now its all out “gang-busters” (Aussie expression) to achieve whatever I can through savings and ‘safe’ investing. Is there such a thing? Well, yes and no! The Australian Government Guarrantee is a guarrantee to ensure a depositors capital placed into Term Deposits will at least return capital investment if there should be a problem with the financial institutions not being able to return the interest on the your capital investment. The financial institution rate of interest for the term deposit is often lower than the returns on some other investments, however, it is often better than bank interest at any given time. The safety-net for investors is the government guarrantee which ensures the capital invested is returned to the depositor without loss at the end of the investment period should something catastrophic occur to prevent the financial institution from giving a dividend on your investment.
Now I don’t know if this is one of the ways Moneyning is referring to for those of us who would like to improve their financial situation, even in retirement or nearing retirement and at least be safe. It is not a clever means of saving taxes, because tax is payable on the interest earned. However, while I am working, I am salary sacrificing which helps to reduce my tax liability. It would be helpful Moneyning if you could offer some suggestions for those of us soon to be out of the workplace and needing to preserve savings and yet still make money.
Great post. I started getting serious two years ago about my career and this year (2009) I earned a whopping 35% increase in my salary. Yes, in a “down” economy. Increasing my skills, earning another degree and becoming the “go to” person with the cheerful attitude worked in my favor. Since I’m a single mom of 3, I must say, I needed the income yet we are smart. I tithe, save 13% and we live off a strict budget. No latte factor here. Just a determination to live financially free.
I think we all need to improve ourselves, our skills, and our earning ability. If we work on ourselves and seek opportunities to earn more it is a worthy endeavor.
Would it be fair to say that those who just focus on cost savings just don’t know HOW to go about making more money?
It perplexes me that people are trying to save $20/month on electricity and freeze to death, when they could just try and make a side income and generate $1,000+ just from an online site for example.
The median income for a 28 year old Top 20 MBA grad is $110,000. Guess what these guys are making at 35? Probably at least double if not 3-5X. If people want to make money, why not just do this? So many folks just tell me it costs too much, or it takes too much time. If that’s the case, then be happy with your curent income and stop whining. 🙂
FS
In our everyday life, it is easy to value money over time because we constantly want to continue making more and more money. However, when you take a step back and think about it, time is worth WAY more than money-it’s actually priceless. In addition to that, I think taking time to THINK about making money is even more valuable because that way, you’ll develop better ideas and hopefully find a loophole to make more money rather than just bringing home the 9-5 income.
I agree that it is important to put effort into generating more income. Some of us are so focused on saving, that we forget how important it is to find more ways to make more money. Sometimes, it may even cost you money or an investment to get to the next level and generate more income. I’ve put some of my savings toward a couple businesses that I’ve started and I hope that over the next couple years, I’ll be generating significantly more income because of it.
I get a tall hot chocolate at Starbucks every time I go. For me this isn’t a luxury, it’s rent. I work at Starbucks and usually spend several hours there at a time.
However, I do treat myself with chocolates from a spectrum of See’s Candy to m&ms – ice cream, Paradise Bakery Cookies fall somewhere in between.
Nobody got rich spending all the money they earned.
Everyone that did get rich; did so by not spending all they earned.
It’s not what you make, it’s what you keep.
If you are frugal (use your wealth efficiently) you can then afford a few luxuries like latte. The more frugal you are the sooner and the more luxuries you can afford.
I don’t believe you can compare what you earn/hour to what you spend. Most of what you earn is already accounted for in fixed and variable expenses. The only way to compare your time to the cost of paying someone else to do something for you is to use the value of your savings.
I may make $300 per hour but I only save 5%. That means an hour of my time is only worth $15 to me. Even if I am an attorney I cannot afford to pay someone else to do my laundry.
Another way to look at it is: If I spend $30 to hire a plumber, I would need to generate $600 income to have enough to pay all my bills and have an extra $30 at a 5% savings rate to cover the cost of the plumber without a negative impact to my savings.
I agree that using our savings would allow us to not overvalue our time but since we can essentially control our savings rate to a degree (if you think about it, even the so called fix cost is controllable and changeable), it might not be the most accurate measure.
Instead of using our gross pay. Perhaps using take home pay is more appropriate?
David, I’m glad you are fueling the economy as well with your latte purchases 🙂
Find something you’re really good at – and bet on it. Technically it’s not gambling because you’re betting on something you control, and you could come out way ahead.
This sounds crazy, but over the course of months, I made about $1,000 playing free cell online. For money. It turns out I’m really good at it, and I found a site that let me deposit money and wager on head-to-head games (person who finishes fastest wins). The site got taken over by another, but by putting faith in yourself, you could make big bucks. Well, enough to pay for your coffee habit and not feel guilty about it.
Daniel, making money off free cell online is definitely an unusual way to earn income. I would be very careful and not start wagering bigger and bigger amounts though, because what you explained is essentially gambling and it could be addicting and dangerous.
Otherwise, keep doing what works and best of luck.
Joe – It worked for me 🙂
A great reminder that while spending less is important, we cannot cut our way to wealth.
Your assets column has to be greater than your liabilities, and life is far too short to suffer through all of it and never enjoy a latte or a vacation.
This is why I dislike people like some of the savings experts- do without until you’re old and never enjoy your life all so you can have more money to give to the grandkids.
It’s less to do with grandkids and more to do with supporting your lifestyle in retirement when you are unable to work to earn money, but still able to enjoy life’s pleasures and pay the bills.
A legacy for the children/grandchildren comes from what is left from living your life (for most of us). Those who can afford to set-up trust accounts for the kids – well more power to them. Frequently it is what is left in the bank, the sale proceeds of your home (less and debts) which is divided among the grandchildren. If a person dies intestate, well the lawyers will get a greater chunk of what you have before your beneficiaries will.
Perhaps the next generation will be in a better place financially ie financially literate from an early age, to secure or give the lives of their grandchildren a boost to ‘earning’ and accumulating wealth.
I’m all for you here, enjoy your cup of coffee and make more money while drinking it, so you don’t have to worry about spending a little extra for life’s luxuries.
I mean, I’m all for being frugal, frugality is extremely exciting, really, but sometimes we’ve got to think outside the box in the time versus money equation.
Say instead of spending $3 on your coffee, you decided you were going to make a cup of coffee instead.
Now, I don’t have any idea if you buy your coffee on the way to work or just go out for coffee on its own, but you would have to spend the time making the coffee first (let’s say about 15 minutes maybe with brewing and everything), and then you’d need a disposable cup or some other means to transfer the coffee (price of cup), and then of course you still have to buy the coffee beans and maybe grind them on your own ($4 for coffee beans plus the grinding time of 1 minute).
This all adds up into time spent and money spent over the long period, so if say it takes you 15-20 minutes altogether to prepare your coffee, then if you can make $3 within less than 15 minutes, like you make $20 an hour doing something, then you’ve actually beaten the equation by buying your coffee on the go, not including any time spent in the coffee house I suppose.
Anyway, you get where I’m going with this, it’s the reason extremely wealthy people pay to get their laundry done, because their time is actually worth more than the money it costs to do such things.
Say a lawyer makes $300 an hour, then it just doesn’t make sense for them to do their own laundry to save $30 for a laundry service when it takes them an hour of time, and they could make more money in the same amount of time, so they’re actually losing time and money.
Plus, my god, we’ve got to enjoy these little things, that’s what makes life pleasant.
The last few times I went to get a cup of coffee, I actually walked to the Starbucks across the street to get it so I didn’t save any time at all. I used the trip as a nice break, and also to get a breath of fresh air.
I think that we sometimes value our time TOO much, and it becomes as excuse to do less. In your lawyer example, I agree that $30 for laundry is not appropriate for her, but more because the person probably doesn’t want to do laundry, as opposed to the time it takes. The lawyer probably has the 15 minutes to do the chore, assuming that the laundry machine is working on its own without supervision for the majority of the hour that it takes to wash a load. However, if spending that 15 minutes frustrates her, then the $30 is not worth it, period because she is risking much more than by being stressed out when it could be taken cared of for $30.
I totally agree with this though – “the little things is what makes life pleasant.”
It can help, something like recycling cans could just lower the costs of your groceries a bit, not much but still can help. It all depends on if it is worth it. It you have to go out of your way for a few cents, may not be worth it.
That’s right Craig. If you get some personal value from recycling cans – exercise through walking around and collecting; meeting people along the way – pleasure and networking; as part of Community Watch; ridding your neighborhood of rubbish (altruistic), and so, then there are many ways of value – the collection of cans is a monetary bonus (if you have the time to undertake the ‘chore’). In a way, it is working for money.
Marici ‘gets it’ too, in my view. Money is what buy’s a lifestyle – money does not have to be a lifestyle. If you have enough to live well (different for everyone) then why be a slave to working and earning. On the other hand, many who have used their savings from earning, who have the knowledge, skill and stomach for it, don’t work any more than a couple of hours a day at a computer screen managing their investment portfolio. They can do this from nearly anywhere in the World while traveling, for example. The rest of their free time is up to them to put to good use. It all depends on your values and what makes YOU HAPPY.
1. The nice side of being Frugal is that we can afford to spend on what we want – that being your lattes. No guilt.
2. I have to still disagree, respectfully, with finding ways to make more money – NOT gonna happen in my lifetime 🙂 It’s all about NOT spending… then there is NO reason to earn more, only to spend it. If I’m NOT spending the money, then I sure don’t need to make more of it 🙂
3. My Time is worth much more than the Money is…. therefore why would I want to give up more of my Time – my Life – for just Money – when by not spending in the first place, I don’t need the extra Money???
Money is NOT worth exchanging my Time for. Period. Which do you value more? Your TIME or Money? For me it’s Time. Time on this earth is Limited. Period.
Of course – that is only MY situation. To each his own 🙂
You question about “time and money” brings up an interesting point. The natural response is, of course, time is more important than money. But at this stage in my life, I wouldn’t quite know what to do every day if I don’t strive to make more. I mean, even if I have all the money in the world, I wouldn’t be happy because I wouldn’t feel productive. In that sense, there’s value in working, and by working hard, you bring in money.
If you were in my case, would you value time or money?
David – I would still value time more than money.
There is work and then there is work…. meaning, you can work for money, or you can work at something you enjoy doing (which is more pleasure but can still be work – like gardening, sewing, cutting firewood, spending time at a charity, fishing for food, etc)
You say you wouldn’t be happy because you wouldn’t feel productive… but you can feel productive without working for money…. such as you could be watching the baby (work – and pleasure, no pay in $$). You could be painting a room in the house – productive but no pay. You could sew baby clothes or a quilt – work (and pleasure) but no pay. You could garden, harvest the garden, can the garden….. all work, all productive, all no pay $$. You could donate your time to a charity (work) and no $$ involved and still feel productive.
There are hundreds of ways to spend your time productively, even “working” for no pay, and still feel productive. Working hard does not necessarily mean bringing in money. I do understand the need to feel productive, and the need to feel needed goes along with that. But it’s just not necessarily about money.
Maybe you should examine your need to feel productive – what underlies the feeling that ties it to money? – and see that there are ways to get that feeling without working for money 🙂 Is there a reason that only “bringing in the money” will bring you that productive feeling? There are other good ways to get that feeling 🙂
Enjoy life.
You’re right. The long road ahead for me and my family is what keeps me wanting more money I guess. I think once I buy a house and pay off the mortgage, I’d be much more comfortable with living 🙂
There are so many ways to interpret “making” money. How about planting a garden? You can feel productive because there is always watering and weeding to be done; you can gain satisfaction at the health of your plants, and you can feed your family with the fruit and/or vegetables, which is something you would have spent money on otherwise. For $1.75 investment in tomato seeds, you can easily produce $20 worth of tomatoes. You’ve just made (or saved depending on how you look at it) $18.25. If you let your children have a produce stand on the weekend, they might actually make real money, which they can invest in new seeds for the next year. I have found that the time I allocate to my garden definitely does not pay minimum wage, but the satisfaction and exercise I get are worth more than a $40/month gym membership!
Hey Marci,
Haven’t seen you for awhile.
It’s always interesting and educational to get your take on things. Basically, you’re at a point where we all want to be. Financially and doing what you want.
🙂
Only cuz I’ve learned that it doesn’t take much money to get along 🙂
And because I have “enough” saved for retirement – altho my figure would not be enough for some people for a year 🙂 LOL.
Priorities do change once you are debt free 🙂
This is a great point that you’re making – that we often forget one of the most important pieces of the equation in the personal finance blogosphere – the income side of the equation. We often nitpick about a dollar here or 10 dollars there, but then neglect to try and find ways to increase our salaries, increase our side incomes, etc. We need to find a balance between the two.