Category Archives: saving money

Do You Create or Consume Wealth?

29 Tuesday Jan 2013

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If your existence isn’t producing more monetary value to others than you are receiving, then you’re helping whittle away wealth from the planet.  And if the efforts of those Creating True Wealth don’t surpass the effects of those lapping up wealth like starving dogs, then economic depression isn’t far behind.

Where Does Wealth Come From?

Luckily, a lot of people like to work and are pretty good at their craft, which helps drive the economy.  Simply put, wealth comes from financing work, in other words, spending money to purchase something that someone worked to produce.

If you pay someone to make something tangible for you, the act of them exerting their time and energy upon the raw materials to create the item actually increases wealth on the planet – for them and potentially for you too depending on the quality of their work.  They get paid for their time and increase their wealth.  In return you get something theoretically of equal or greater value.  If the item is of greater value than it cost you, then you have profited from your investment and further increased your wealth as well.  Nice, huh!  Others third parties may benefit too.

George S. Clason describes the principle nicely in his book The Richest Man In Babylon:

cool palace“Wealth grows wherever men exert energy…If a rich man builds him a new palace, is the gold he pays out gone?  No, the brickmaker has part of it and the laborer has part of it, and the artist has part of it.  And everyone who labors upon the house has part of it.  Yet when the palace is completed, is it not worth all it cost?  And is the ground upon which it stands not worth more because it is there?  And is the ground that adjoins it not worth more because it is there?”

Building one house may not make anyone wealthy, though.  In fact, a stream of house building producing a steady income, alone, won’t do it either.

The Discipline of Saving

A portion of your income must be saved for your purse to fatten.  “But when I began to take out from my purse but nine parts of ten I put in, it began to fatten.  So will thine.”  In other words, “pay yourself” by keeping a minimum of 10% of your earnings for saving and investing.

Again, Clason makes a great point:  “Which desirest thou the most?  Is it the gratification of thy desires of each day, a jewel, a bit of finery, better raiment, more food; things quickly gone and forgotten?  Or is it substantial belongings, gold, lands, herds, merchandise, income-bringing investments?  The coins thou takest from thy purse bring the first.  The coins thou leavest within it will bring the latter.”

Discipline is Spelled BUDGET

“The purpose of a budget is to help thy purse to fatten…It is to enable thee to realize thy most cherished desires by defending them from thy casual wishes.”  Don’t you love how that is said!

Evaluate your expenses to determine what is really necessary, considering “That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.”

How Much of Getting Wealthy is Luck?

Becoming wealthy is not due to luck.  But don’t pass up opportunity.  Act immediately if the price is good.  “Good luck” follows opportunity.  “So must every man master his own spirit of procrastination before he can expect to share in the rich treasures of Babylon.”

Good luck is this:  Hard work, learning, and to “be in the front rank of progress.”fish for dollars

Other Things to Keep in Mind While Growing Wealth

Assess risk before investing in anything.  Consult those experienced in handling money.  Get advice from experts.

“If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon thyself.”

Protect your money.  Safe, small returns are better than risky ventures.  Principle must be safe and available.

Don’t force money to impossible earnings.  If it seems too good to be true it probably is.

“Easy money” and “get rich quick” schemes don’t create wealth (they might make an individual richer, but it’s usually due to someone else’s loss).

Your desires must be simple and definite.  Don’t have unrealistic or overly-complicated goals.

As your 10% grows and multiplies, consider buying houses and other property.  Diversify your investments.

Own your dwelling, and buy it out of the 90% left after you pay yourself.

Plan for income in old age.  Your investments should produce income.

In Summary, Create Wealth by Doing the Following:

Work hard.

Save at least 10% with discipline.

Use a budget to make your money behave.

Look for opportunities.

Seek advice from experts, read, get second and third opinions.

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All Quotes from, The Richest Man In Babylon, George S. Clason

Uncommon Cents (why we don’t budget)

14 Friday Sep 2012

Posted by in Growing Wealth, Help is out there, saving money

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Growing money is all about dollars and sense, yet ironically we quickly lose our common cents just after payday.  Most people are not even doing the basics, ignoring the simple rudiments that our grandparents and great-grandparents seemed to know instinctively.  Often we find that at the end of the money, there’s a lot of month left.  We wonder where in the heck the money went.

Laboring so hard to earn the money, to spend the money, and to take care of all the toys we buy with the money, we resist and even resent having to do any extra work with the money once we get paid.  So we spend without a plan and get ticked off when the money skips off.  It makes no sense that we continue to run like crazy just to keep losing the race.  What we’re losing is our horse sense.  We busy ourselves with all kinds of other work, and don’t have or make the time for “working on our money.”

We’ve got boundless time for work, work, and more work – forty, fifty and sixty hours per week.  We find even more time to toil on the weekends to take care of our toys – washing the cars, scrubbing the camper, buffing the boat.  Then with what little time we have left we weed and mow, clean and sew, spend our dough, and then plop in front of the big screen after our blowout barbeque to do arm exercises with the remote in one hand and a bag of Doritos or cold beer in the other.  We have it down to an art.  Except one part.  We don’t work on our money once we earn it.

There are all kinds of ways to work on your money.  But none of them will matter if you don’t master the first step.  We’ve all heard that dreaded “B” word, “budget,” and we yawn as we think about ever actually trying one.  But having a simple, written plan on how you will spend your money each month doesn’t really take much effort.  Further, people who have done this regularly swear by how it prevents overspending and forces you to tell your money where to go instead of wondering where it flew.  So why doesn’t everyone do a monthly budget?  It’s wild, because doing a monthly budget would take less time than the commercials you suffer through in just one hour of television.  What do you really have to lose, honestly?  Missing ten minutes of embarrassing commercials on the potential side effects of medicines you can’t do without…yeah, you get the picture.

A few years ago Deborah and I helped teach a personal finances class where we covered all the money basics, including monthly budgets.  We told people that, yes, the first few months of doing a budget were painful for us because we had to figure out where all the money was going and then get it written down on paper.  But after a few months of perfecting it, we had a simple budget form and using it only took ten minutes or so a month.  What’s funny is that on more than one occasion since this class we have bumped into someone at the store or downtown that was in our class and they would say something like “you mean you guys are still doing a budget?”  As if a budget is just a temporary means to help someone out of a disparate situation or something!

A budget is king.  Our road from rags to riches had nothing to do with fancy investing.  It literally happened from consistently following our budget, month after month, year after year.  Investing is good, but what’s the point if you don’t budget because you’re probably hemorrhaging more money every month than you could possibly make investing.  It’s not really how you invest your money that counts the most.  It’s how you spend it (or not)!

Common sense would see the value in the monthly budget and do it.  Yet we spend more time deleting unwanted emails in one day than we’ll spend working on our money in an entire month.  Are we losing our minds?  We spend the very least time taking care of the thing that we spend the most of our time making!  But hey, we have over a thousand friends on Facebook.

Every dollar lost out of your wallet is another one that has to be earned again.  So enough already.  Learn to budget and shave off years of having to set your alarm clock.  Budgeting is not necessarily fun and glamorous, but I bet your job is not a barrel of laughs either.

Middle Class Losers?

04 Wednesday Jul 2012

Posted by in Debt, Growing Wealth, House, saving money

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We just read yet another financial article, The American Dream Shrinks, that says how the middle class are getting poorer and the rich are getting richer. That may be true, but one doesn’t necessarily result from the other.

The fact that the middle class is getting poorer is not because rich people are taking our money. We (the authors) are middle class, yet we are not poorer since the national financial fiascos starting in 2007 (initially, yes, but not once the storm calmed). In fact, we bought a house at the height of the housing “bubble” and actually paid it off during the recession.

Yes, we lost half of the money we had in the stock market. And our house value slumped. But in 2007 we had no other debt but the mortgage, no car payments, no student loans, no credit card debt or any other payments. Granted we’ve been able to keep our jobs while we continued to live cheap, drive older paid-for cars and save. All the extra money we could squeeze out of each month’s budget we put on the house.

The stock market has made comebacks since then. So overall, we’re at least where we were in 2007 or better. But the point is – we did not end up poorer, because we’ve finally wised up about preventing others from taking our money (usually in the form of interest payments, but also in frivolous purchases).

Job losses, health issues and other crises can bring on financial challenges, even disasters. But it doesn’t always have to be the case. With no debt, it is much, much easier to weather the storms.

If the rich are getting richer, it’s only because they have figured out how to weather the storms. Understand this: Rich peoples’ houses (if they are big and fancy) can drop in value way more than modest sized houses after a bubble burst and are harder to sell. Rich peoples’ stock market investments drop as much as they do for the rest of us in a crash too. They’re not immune to economical disasters, usually just better prepared for them.

And that can be us – prepared for the bubble bursts, the job losses, the market dips and other unexpected hits to our finances. The first thing to do is get out of debt! It’s surprising how little you can actually live on if you have no debt.

We know a couple who has very little debt other than the mortgage. The husband lost his job. The wife works just thirty hours per week. They can still make their house payment and even continue to save some money on one income because their debt level is so small.

Getting out of debt is the only way to go, folks. Let’s quit blaming the rich for making us poor. Because it’s really not them doing it.

Free Entertainment

15 Tuesday May 2012

Posted by in Fun, Not Just About Money, saving money

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Quite often we see folks buying all kinds of stuff to amuse themselves.  Yet those very things require a bunch of time and money to buy and maintain.

Lots of things are free.  You don’t have to spend much money (or in many cases, any money) for entertainment.

Here are some ideas:

  • Play at your local parks.
  • Take a walk on local trials or at the beach.
  • Ride bikes on local trails.
  • Swim at the local watering hole.
  • Watch free internet TV (like Hulu) using your Roku box.
  • Listen to free internet music (like on YouTube).
  • Attend local events (concerts in the park, hot air balloons).

What do you do for free or cheap entertainment?  Reply with your idea, and we’ll add it to this list.

The Walla Walla Balloon Stampede was totally free – even got a ride in a hot air balloon!

Would You Pass the Marshmallow Test?

07 Monday May 2012

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This article is by Daniel Murphy, Books2Wealth.  It is very insightful as to the issue of delayed gratification, which many of us struggle with.  And when it comes to personal finances, that can be disastrous.

Would You Pass the Marshmallow Test?

In 1972 a study was conducted called the Stanford Marshmallow Experiment. Young children were given a single marshmallow and told that if they did not eat it for 20 minutes they would get another one. If they ate it they would not get another one. Some of the children could not wait the 20 minutes and ate the marshmallow. Other children could wait and received a second marshmallow after the 20 minute wait. This of course is a test of our ability to delay immediate gratification for the promise of a greater reward later on.

The study then tracked these children through adolescence. They found that the children who could wait for the second marshmallow were better adjusted children, were more successful in school and more likely to successfully attend college. They got better grades and scored higher on aptitude tests. You can actually watch these children in this study in this three minute video.

We naturally see waiting for something as a form of deprivation. It takes more wisdom and self-control to see that postponing immediate gratification can pay off greatly in the long run. Rather than seeing this as deprivation, we can learn to see it as an investment in our future.

Each of us is in this marshmallow test every day. The way we spend our time and our money is the same kind of marshmallow test. Those of us who are better at postponing that immediate gratification reap much greater rewards over the long term. Those who cannot wait get less out of life.

In today’s articles we explore various forms of “deprivation” through spending less money and more wisely using our time. The more we can see this not as deprivation but as an investment in our future the more successful we can be. Like most lessons of success, this is a simple lesson to learn, but not an easy one to live.

Are you an impulsive marshmallow eater, or can you wait to double your marshmallow enjoyment? The answer may well decide how fruitful your life will be and how much wealth you will build. Replace the idea of deprivation with the idea of investment and you will reap the benefit time and again throughout your life.

Gimme a Dollar Then!

17 Friday Feb 2012

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One of my coworkers, George, was telling me last week that quite often in his conversations with people about ways to save money on things they buy, many folks will kind of shrug off the idea of only saving just a few dollars and say “it’s not enough money to worry about.” To this George will hold out this hand and reply “okay, give me the money then if you really don’t care about it.” Then they’re not so quick to part with the dough!

This should really make you stop and think about how important the little stuff is. Is it truly worth saving just a few dollars here and there? The short answer is, absolutely! And here’s why.

Aside from the fact that a few dollars here and there can actually add up to significance, and that alone is a reason to save money whenever and wherever possible, the effort and attitude required to get regular discounts/savings is the same regardless of whether you’re saving a few dollars, or a few thousand.

This frugal way of thinking has to become a way of life. Once it’s ingrained in you, then you will more often opt to save money no matter how much or little. The sad fact is, though, if we aren’t too concerned over saving “just a few bucks” on something then we probably have not trained ourselves in being thrifty enough and are likely missing out on many potential savings.

For example, Deborah and I will periodically examine all of our “utility” type payments (phone, television, and internet services, etc.) and see if we can get better deals. Usually it takes just a little research on current promotions and a phone call to the provider to get a better deal or an upgrade to your plan for no extra cost. It helps if you avoid contracts. And if we buy a bit too much material at the home supply store, rather than let it take up space in the garage, we’ll return it – even if it’s only several bucks worth.

Does this sound like we’re cheap skates? Call it whatever you want but this kind of attention to detail has enabled us to own our house outright and have no debt after only about seven years. We evaluate every purchase to ask ourselves whether we really need it and, if we do need it or just want it, then can we get it cheaper somehow? And we do this at every level, big or small. The previous examples about utilities and materials from the home supply store are peanuts compared to the huge savings we’ve realized on big purchases like cars and our house.

So be a nerd about your spending. Count the cost before plunking down your cash. Evaluate. Sleep on it. Ask someone’s opinion. The irony is that you’ll soon find you can afford so much more because you’ve learned to keep more in your wallet!