Should you focus on Increasing income or reducing expenses?
Cash flow chart involves simple mathematic calculation: Saving = Income – Expenses. Savings is the priority since it appears first in the equation. To increase saving, we can either increase income, reduce expenses, or doing both at the same time. Which option requires your most attention?
Focus on Reducing Expenses
If your main focus is on cutting down your expenses, it is all about frugality. I found that many of the personal finance blogs preach about how important it is to live frugally. Is it worth your effort? When you don’t know how to increase your income, cutting down expenses is the easiest route to increase your net worth.
50 things you can do to reduce expenses
1. eliminate cell phone
2. cancel newspapers, magazine and other periodicals subscriptions.
3. use energy efficient lamps
4. purchase generic prescriptions when possible
5. buy in bulk when shopping for grocery
6. terminate your gym membership
7. read books at library instead of going for movie
8. cut your vacation
9. stay at home whenever possible
10. stick to your budget
11. cancel your TV subscription
12. use email instead of phone whenever possible
13. compare before you make any purchase
14. plan menus for the week before you shop grocery
15. prepare shopping list to avoid impulse buying
16. go to the store just once a week
17. do not go to restaurant when you are hungry
18. plan the use of leftover food
19. buy clothing at the end of the season
20. shop at discount stores
21. buy used item whenever possible
22. use public transportation, if available
23. have good health habits
24. avoid smoking
25. avoid drinking alcohol.
26. play board and card games, they are cheaper
27. attend concert only if it is free
28. make your own home accessories
29. consider less expensive housing
30. Pack school and work lunches
31. review insurance coverage. Are you over insured?
32. reduce trips outside the home
33. use 10% less than usual
34. stop shopping… not even window shopping
35. change to cheaper brands
36. look for discount coupon
37. buy only when you are offered rebates
38. drink plain water only whenever you dine out.
39. don’t keep more than ten bugs in your wallet
40. cut all your credit card except one
41. do your own car maintenance such as changing oil
42. stop going to a hairstylist
43. rides bike instead of car
44. avoid silly bank fees
45. don’t buy a car
46. just rent a small room to stay
47. share room and split the rent
48. stay with your parents
49. start blogging and it will cut all your other entertainment
50. ask for discount every time before you pay for something
Hard work and no fun!
Wow !!! There is a lot of hard work. But do you really have fun doing all those frugal things?
How much can you save? It is limited.
No matter how hard you try, you can only cut down your current expenses completely. Most people will celebrate if they can cut 10%. 30% is already too much for most people to compromise their lifestyle. Crux of the matter is, by concentrating on reducing expense, what you get is hard work, no fun, and only be able to save as much as the amount you didn’t spend.
Focus on Increasing Income
If you change your focus to increase your income instead of reducing your current expenses, you will see a whole new world of opportunity.
25 things you can do to increase incomes
1. invest in stocks
2. invest in real estate
3. increase your knowledge
4. sell items you no longer need
5. get a part-time job
6. rent out spare room
7. join MLM
8. start a business
9. learn how to sell
10. make money online
11. get a raise or a second job
12. change your thinking
13. raise your rates
14. get extra work
15. get money from public aid or charities, if you are qualified
16. go back to school to acquire additional skills
17. buy an established small business
18. arrange a better feng shui at your home and your work place
19. start a make money online blog
20. invest in mutual funds
21. take your company public
22. pay less tax
23. learn forex trading
24. invest in ETF
25. get sponsorship from family members, if you dare.
Tough job but a lot of fun!
How much can you probably earn and save? It is unlimited!
Sky is the limit.
Are you a great saver or an income pursuer?!
So, how much time do you spend in a day to increase your income? 8 hours? 12 hours?
Is it viable to cut down the effort to live more frugal? And spend the time saved to actually work out some plans to increase your income?
I am definitely an income pursuer. How about you?
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance & Financial planning.
Tuesday, August 10, 2010
Sunday, August 8, 2010
What do you buy with your savings?
What do you buy with your savings?
As long as you are not spending more than you earn, you will have money left as savings. Habit of saving money is the fundamental of a sound financial plan. But it just shows you half of the story.
Saving money is not equal to accumulating wealth
How much you save does not tell me how wealthy you will be. It is what you do with your savings that counts. Saving money does not mean you are accumulating wealth. Saving money is only the first step of accumulating wealth. You must understand that your mother’s advice of putting coins in piggy bank just prevent you from getting poor. It won’t get you rich.
What do you buy with your savings?
Now, here is what makes the difference.
What do you buy with your money saved?
You can actually do all sorts of things with your savings. You can spend it on a vacation. You buy yourself a new car. You can invest it for more income. Getting rich or not, it is how you spend money that counts.
The purpose of purchase
We spend money to have something valuable in return.
The purposes of a purchase
In order to get rich, the purposes of your purchases shall align with your goals of accumulating wealth. The purchase purposes can be prioritized as below:
Getting more income
Increasing knowledge
Increasing productivity
To remain healthy
Then all the other purposes become secondary, such as spending money for fun, for more comfort, or keeping up with the Joneses etc.
Two things to buy
There are two major categories of things you can buy – assets and liabilities.
When you buy a dividend stock, which gives you yearly dividend distribution, it generates income. When you buy a growth stock, and sell it for a profit months later, it gives you capital gain. These stocks are assets.
Buy income-generating assets
When you buy your own house, it triggers more expenses such as quit rent, more furniture purchase and also renovation cost. Therefore, your house is a liability. We call this expense-triggering possession.
Buy expense-triggering liabilities
When you buy an iPad, it may increase your productivity. But its value immediately dropped, incurring capital lost. Is it a liability or asset?
When you spend thousand of ringgits on an oversea trip, you gain experience although there is a capital lost. The experience may rejuvenate your tired mind and make you more productive. The experience may also widen your view and inspire your next money-making idea. Who knows?
Over time, you will develop your senses to differentiate which purchase is an asset, and which one is a liability.
Now, think back of your last three major purchases. Are they liabilities or assets?
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance & Financial planning.
As long as you are not spending more than you earn, you will have money left as savings. Habit of saving money is the fundamental of a sound financial plan. But it just shows you half of the story.
Saving money is not equal to accumulating wealth
How much you save does not tell me how wealthy you will be. It is what you do with your savings that counts. Saving money does not mean you are accumulating wealth. Saving money is only the first step of accumulating wealth. You must understand that your mother’s advice of putting coins in piggy bank just prevent you from getting poor. It won’t get you rich.
What do you buy with your savings?
Now, here is what makes the difference.
What do you buy with your money saved?
You can actually do all sorts of things with your savings. You can spend it on a vacation. You buy yourself a new car. You can invest it for more income. Getting rich or not, it is how you spend money that counts.
The purpose of purchase
We spend money to have something valuable in return.
The purposes of a purchase
In order to get rich, the purposes of your purchases shall align with your goals of accumulating wealth. The purchase purposes can be prioritized as below:
Getting more income
Increasing knowledge
Increasing productivity
To remain healthy
Then all the other purposes become secondary, such as spending money for fun, for more comfort, or keeping up with the Joneses etc.
Two things to buy
There are two major categories of things you can buy – assets and liabilities.
When you buy a dividend stock, which gives you yearly dividend distribution, it generates income. When you buy a growth stock, and sell it for a profit months later, it gives you capital gain. These stocks are assets.
Buy income-generating assets
When you buy your own house, it triggers more expenses such as quit rent, more furniture purchase and also renovation cost. Therefore, your house is a liability. We call this expense-triggering possession.
Buy expense-triggering liabilities
When you buy an iPad, it may increase your productivity. But its value immediately dropped, incurring capital lost. Is it a liability or asset?
When you spend thousand of ringgits on an oversea trip, you gain experience although there is a capital lost. The experience may rejuvenate your tired mind and make you more productive. The experience may also widen your view and inspire your next money-making idea. Who knows?
Over time, you will develop your senses to differentiate which purchase is an asset, and which one is a liability.
Now, think back of your last three major purchases. Are they liabilities or assets?
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance & Financial planning.
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