Chill Maadi

How to save money? Where can I cut more on expenses? What can I do to save some money? Questions after questions hit your head every day and every night if you live on a shoe string. It is a constant worry for everybody in these days and age. For a single mother, it is even worst when you face the challenge of raising children on your own. I have to find ways to make ends meet. I have to be creative in what I do. So through trials and errors, I found 5 areas in my daily life where I can save some money.

1. Groceries expenses

   Every week, flyers arrive in your mailbox whether you want it or not. Why not scan over the store advertising that you shop at, and make out a list of what is on sale? It will save you time remembering, keeping you on track, and be aware of what you buy. If you have coupons, use them, and these will add up to your savings. If you have internet, look for coupons online, print them out and take them to your market. Go to: Print Coupons. Shop for mark down meat, bread, dairy products, fruits, and vegetables. They are generally not bad; they are just really close to expiration dates. Just make sure that your family can use these items before they are expired. You are not saving any money if you ended up throwing them out.

2. Gasoline expenses

   Organize your trip well. Mentally recall the route that you will be traveled on. What stores are you going to pass? Do you need to do some shopping in those stores? Instead of jumping in your car and take off every time you need something, have it map out before you get on the road can save you a bit of money spending on gasoline. I am very frugal in this aspect since gasoline is now cost an arm and a leg. I only stop at stores that were conveniently on my way there, and go to stores that were conveniently on my way back. I do not turn around or go in circles.

3. Shopping expenses

   Paying for high prices in clothing and shoes are not an option in my house. I only shop in stores that have clearance sale. Yes, my kids are embarrassed when I told them to “hit the clearance rack and start digging”. However, it has quickly become a game for us to see who’ll find the best bargain. I put a limit amount of money on every item that we buy. I usually shop at TJ Maxx, Marshall Mall, and Burlington Coat Factory for clothes. For shoes, I shop at Famous Footwear store with my free reward program card, they send me a $10.00 coupon every few month. These stores offer brand name designers at a low price that fits my pocket. Wal-Mart is my store for household supplies. They are a bit cheaper than Target, or K-Mart.

4. Utilities Expenses

   Electric, water, heat, and phone bills eat a chunk out of your income every month. For electricity, we only use one high efficiency light bulb at a time. We turn off lights in other rooms, unless someone is using it. My children learn at a very early age to turn off the light, the radio or the game when they leave the room. In the winter, we keep the heat at a comfortable degree, and wear an extra sweater if we get cold. We don’t turn the heat up without putting on socks and an extra layer first. As we have all learned about how to conserve water, we apply that rule at home too. We don’t run water while brushing our teeth or washing our hands. You have heard that having a bath takes less water than a shower, right? Well, do it. It will save gallons of water, which in turn, save on the energy, and resulting in saving you money. For my home phone bill, I cut it down to the core. I have no call waiting, no long distance, and no caller ID. I keep my phone on the lowest price possible since I had a year contract with DSL.

5. Entertainment expenses

   I allow my children one fast food meal, and go to one second-run theatre a week. These alone cut down on my entertainment bill to more than half. At second-run theatre, I pay only $2.00 per ticket compares to $8.00 at other theatres. Once a month, we go to a good restaurant with the money I put away for this purpose. I sign up with Block Buster online program at $10.00 a month. I get one movie mailed to me; I then take this mailer back to the store and pick out another one to watch, while waiting for the next mailer to come in the mail. This is unlimited. This too, has saved us lot of money. Instead of spending $6.00 on two new movies once a week. Well, as I wrote this article, Block Buster has just changed this rate, it’s now limited to two in store movies per month. I guess they just want to hook you in, and then change their program to make more money somehow.

Look around to see where you can cut. Work it out on a piece of paper to see how much you can save a year. Sometimes, the small numbers of saving will not impress you, but if you take that numbers and multiply by 12, you will have a significant different feeling about it.

It is only numbers, but it can actually keep you on track with your budget. Living frugal is not hard if you look for ways to save or cut down. I am a single mother of three, and I am a living proof that it is possible to live on a shoe string in these days without missing much.

A few years ago, I moved to Seattle, WA and put myself through film school.  I lived in Seattle for two years, working as a barista.  In my first year I made just below $14,000.  The next year, I made just over $15,000.  During that time, I didn’t feel any economic pressure and I was still able to dine out, go out for drinks, and frequent movie theaters.  Below is a list of ways I cut my expenses without cutting out all the luxuries.

Cheap Rent

This one is crucial.  In two years time I lived in three locations.  I shared a big house with a bunch of friends, split a basement apartment with one friend, and then got a proper apartment my last 6 months in town.  At no time did I pay over $500 a month for rent, which was still a full pay check.  I never rented any place unless the majority of the utilities were included.

Learn to Love Roommates

You can’t make it off of no money and live alone, at least not in most places.  Try to find someone that has a similar lifestyle but also has their own friends and social life.  That way, you’re not constantly stepping on each other’s toes.

Good Location

All three places I lived had a few things in common.  1. It had to be cheap but in a safe neighborhood.  2. There had to be public transportation very close by.  3. It had to be close to shopping, restaurants, grocery stores and convenience stores.  This was vital.  Being in easy walking distance and/or close to public transport helps a great deal with the next point.

No Car

This sounds crazy in modern-day America, but, trust me, if you can get away without your own set of wheels then you’ll be far better off.  First off, no car payment.  Secondly, no gas costs.  Third, no car insurance.  Fourth, no friends trying to borrow your car and then wrecking it or leaving it on empty.  This saves you tons of money and if you’re close to everything and public transport, it’s really not much of a hassle.

Watch Out For Coupons

A lot of times, coupons are for brand-name products and even with the discounts, they aren’t as cheap as store brand.  The entire time I lived in Seattle, I did not buy one brand-name product if there was a cheaper option.  This will save you some serious cash every month.  Also, I never used a coupon.

Go Easy On The Groceries

Remember, there aren’t that many necessities.  Cereal is cheap.  Sandwich stuff is cheap. Pasta, beans, and soups are cheap.  Round this out with salads and apples as snacks and you’ve pretty much got a week’s worth of groceries for less than $75.   Awesome.  Also, skip sodas, sports drinks, and any unnecessary liquids.  Instead, buy some tea bags and make your own iced and hot teas.

Go To The Movies, Just Bring Your Own Snacks

I was in film school, so skipping the movies was not an option.  I tried to see matinees but didn’t mind springing for evening prices occasionally.  I would buy a small popcorn but sneak in a can of soda.  I know movie theaters make their money on concessions and I love Landmark Theaters, a popular chain in Seattle and throughout the country.  I made sure to buy at least a little something so they made their money and stayed open.  By bringing my own drink, I made sure I didn’t get abused on soda prices.  I could afford to do this a few times a month.

Eat Out, But Eat Cheap

I tried not to eat out often, but when I did, I either made it a lunch out or a cheap dinner.  Typically, lunches are cheaper and quicker.  I don’t skip the tip ever.  I used to wait tables so I refuse to go out if I can’t afford to leave at least a 15% tip, at least.  Also, skip desert, order water, and no appetizers or salads.  You can still get a filling meal, and if you scout it out right, the whole thing may cost less than $15.

Learn To Love Pre-Partying and Happy Hour

A six pack of good beer costs $8; six good beers at a bar could be more towards $30.  Have a few at home before heading to happy hour where the beers are cheaper anyway.  Also, learn to love cheap beers.  I learned to love PBR.  If I can do it, so can you!  Helpful Tip: If you’re in a location convenient to many things, chances are you have a bar or two in walking distance as well.  This will really cut down on cab rides and save you more cash!

Define Necessities

Buying books is somewhat of an addiction for me, but I gave it up while I was a student.  During my school days, I learned to love the library and friends’ collections.  In other words, the free stuff.  My money was for food, film, rent, and little niceties.  I didn’t go clothes shopping unless it was at the thrift store or on super sale at a department store.  I didn’t buy dvds, jewelry, or any “luxury” items and I didn’t miss them.  They weren’t necessary.

Find A Job With Perks

I worked as a barista for a national chain while I went to school.  Not a lot of money but it came with flexible hours, cheap but good health insurance, free coffee/coffee beans and heavily discounted food and snacks.  For part-time work, not a bad gig.  I also got paid vacation time so visiting my family in Virginia was at least partially paid for.

Cheap Outings

There’s plenty of ways to blow money going out with friends, but there’s also plenty of cheap alternatives.  Seattle offered a ton of free parks, free museum days, a large downtown to hang out in, and discounted tickets to students and people under 25 at certain theaters.  I’ve lived in a few different states and have found that many of them have at least parks and a few free events.  Be a bargain shopper when going out.  Chances are, whatever you find to do, you can find a discount for it or a free alternative to it.  This is how I lived for two years.  It was really quite easy and only required a little bit of sacrifice.  It won’t work for everyone, but hopefully one or two tips will be useful to most people.  Oh yeah, and so you don’t think I did  this in the seventies or something, those two years were 2013 and 2014.

1. Always pay your necessities first, including bills, child’s needs, food etc. Once your necessities are out of the way, keep some personal money and put the rest into a savings account, be sure to make a habit of putting this little bit aside and it will grow very quickly.
2. With the price of fuel these days, try not to drive your car as often, this could include doing a car pool or even walking or riding a bike. Another good tip I personally recommend is to fill your car up on the cheapest day of the week, the prices work in a cycle. Even if your fuel lasts 2 weeks you will save money in the long run by routinely filling up on the weekly cycles cheapest day.
3. Food is about the same as fuel these days, if you eat out constantly or live on take away food, you’ll soon notice your funds dwindling once again. Prepare a home cooked meal or bring a packed lunch, believe me you’ll notice the difference.
4. When it comes to clothing, shop around for the best deal, I can tell you now I’ve saved hundreds of dollars on expensive jeans, jackets and so on by not taking the first offer and having a better look around.
5. If you smoke you may want to consider quitting, not just to save money but for your health. I quit smoking a few years back and feel great now, and the money I’ve saved is unbelievable. How many packets do you buy a week? Add them together, do the math.
6. It may take a little money to buy some decent gym equipment, and require a little more motivation to do at home than going to a gym, but once you are motivated you can certainly save some money on monthly gym fee’s and not have to worry about binding contracts and crowded locker rooms.
7. If you find yourself continually buying the same products on a weekly basis and using the same things routinely, consider looking for bulk suppliers and buying things in bulk, you may pay a bit more up front to buy a larger quantity, but you’ll be saving money in the long run.
8. If you’ve got a mobile phone plan like myself, you may be one of them people that always finds yourself with large bills as you slowly lose track of how many calls you make, not to mention how quickly SMS messages add up. Try using a landline more often, or taking a walk to your friends house instead.
9. Don’t be wasteful, I know how convenient it can be just to throw something out and not think twice about it. I’m not telling you to be a hoarder and stack your cupboards to the roof, but think sensibly before you start throwing away things that could be potentially useful.
10. Last but not least, if you find you’ve got some spare money, whether you’ve got some left over, or you won it gambling(you shouldn’t be gambling if you’re trying to save money anyway), you should always hang on to it, never lay your money back down or decide because its spare you need to spend it. Go back to step 1 and put it in that account and watch it grow.

In order to remember well this article, I have here an acoustic of the Word “CASH”.

C-hange Your Lifestyle

In order to increase your cash flow, there might be some changes in your lifestyle. The way you manage your Money and the things you buy.Or your eating habit might need some adjustments in order to save some.

A-lways Be Open-Minded

Opportunities come and go in our lives. Take some thought and grab some opportunities that will lead us to honestly earn some.

S-ave and Invest

Saving is a habit that needs to be practiced in our lives so that it will soon become a part of our system.You might be surprised on the amount you might have gathered after a long time of saving. You might even become a Millionaire just by compounded savings. There are some companies or Institutions that teach about Compounded Savings.You just have to be resourceful.You may use the Internet on that matter.Then you can now Invest what you have saved.

This simple Formula might be of help:

INCOME-SAVINGS= EXPENSE

H-ave a Financial Plan or a Budget System

Be a Financial Executive in your own right. Have a Financial Plan in your Daily,Weekly and Monthly Expenses. Start it by having a 60-day records on all your expenses. This may help you check on how much really is your monthly Expenses. Then put into two Columns the- NEEDS VS. WANTS. You may cut the Expenses on your wants then set aside that amount it may help you in your DEBT REDUCTION. That means you may use the saved amount to pay your Debts.Remember: ” Decreasing Debts is Increasing Cash!”

These are just simple Steps in order to Increase Cash Flow if you follow them, you might be surprised on the results. “Be diligent there is no shortcut to the road of Riches.” Hard earned Money deserved to be Increased little by little it will grow.

There is a lot of talk about cash, jobs and the economy right now, all over the world. People are worried that they could have to take a pay cut, or worse, could lose their jobs. People are also worried that they may not be earning enough money to maintain their current lifestyle. With that in mind, I chose to write this article on how to save money, the right attitude to have towards money, and how to make the most of the money you have available to you.

The first tip is very simple. If you’re unsure of how much you’re spending, always over estimate. That way, you will generally find out that you aren’t spending as much as you though, and you’ll suddenly have some spare cash that you didn’t know that you had. If you under estimate your expenses, you may find that you run into debt when you spend the extra cash you thought you had on luxury items.

Secondly, make sure you always have a limit on the amount of cash that you are willing to spend on hobbies. This can be very tough. Be it gaming, scuba diving, model airplane building or anything else, hobbies generally are very expensive. As hard as it is to accept, food, shelter and security all come before your hobbies. If you have to choose between food and hobbies, you’ve already gone wrong. It should never be a choice you have to make; you should know to put the essentials before the items you want.

If you’re the type of person that likes to go window shopping, make sure you bring very little cash when you do. You can easily be tempted by items in the window if you’re carrying enough cash, particularly if they are on sale or reduced. If you don’t have enough cash, but you feel you want it, you’ll either realise on the way home that it would purely have been an impulse buy, or you’ll feel you need it because it is genuinely necessary.

Always make sure that you save money from your paycheck before you go spending it. If you receive paychecks of $500, and you’ve decided you want to save $50 per paycheck, save that once you get your paycheck. Don’t try to only spend $450 of the paycheck and then have the rest left over. That won’t work, as you’ll be too tempted to spend the extra $50 on something you really do not require.

This is a great way to make some extra cash, without having to further dent your paycheck. Instead of lodging your savings into a normal checking account, open a proper account for savings. You’ll see very shortly that you’re getting a lot more money in interest in your savings account than you would in a checking account. This spare cash could really come in handy in the future.

That’s all for now, but look out for a Part 2 in the future. Remember, a penny saved is a penny earned.

A few weeks ago, a stockbroker came to our school to encourage us kids to save our money and invest so that we too could have an ensured future. I want to share the 5 ways that I learned with you.

Start Now

As they say, it’s never too early to save. Time is an investment too and it’s running!

Invest your Money

Make your money grow. Go to Stock Exchange websites and observe the nature of stocks. Once you’re sure in the company you want to invest your money in, seek the help of a stockbroker.

Try to set aside a meager percentage of your earnings

This is where small things turn big in due time! This is the actual basic saving. Don’t spend everything you earn.

Set a goal

Identify your reasons for saving (Ex. You want to buy a car, open up a business, etc.)And make them motivate you.

Remember, it’s not how much you earn; it’s how you much you spend!

Sometimes, people go over their budget so they use their credit cards to purchase instead. But here’s the thing, once your money is not enough to buy you the things you want YOU CAN’T AFFORD IT.

Many western cultures do not expect children to spend their early married life putting aside enough money so that they can financially support their parents, as the parents would rather they spent the money on establishing their new family unit and supporting themselves with their own day to day expenses.

But in many Asian cultures and further afield, children willingly see that it is their duty to financially support their parents who are of modest means, rather than view their parents as a financial burden. Even if the children move to a more affluent country, such as the United States, their culture does not leave them. Many adult children continue to do what they can to support their parents by sending money home each month.

Own Family Concerns

However, not all newlywed adult children are in a position to offer financial support to their parents for a number of reasons. Some couples decide to start a family right away, which means they will need to save as much of their income as possible once they have their own children to support.

A newlywed couple who hail from the same country and cultural background will understand the unspoken responsibility that they will continue to assume. But a couple who do not share the same background may find that they cannot offer financial assistance to their parents because their spouse does not wish to support their in-laws. Instead, they may prefer to use the money to pay off any outstanding wedding debt or to save up to buy a house. This difference of opinion can cause friction in a marriage whether financial support continues or if it ceases. A couple will need to discuss how they feel about the issue of offering financial assistance and decide whether they will stop the support, send occasional gifts of money or if more regular support will be required until the parents are in a position to support themselves.

Division of Responsibilities

While an only child may at times secretly feel financially burdened with supporting his or her parents, multiple children can help to ease the stress by dividing their responsibilities amongst themselves so that they all have a share in caring for their parents.

Offering financial support to your parents when you are a newlywed can help to keep parents afloat as they struggle to make ends meet, or it can cause tension in your own marriage. There is no right or wrong answer when it comes to offering financial support. Many factors come into play when deciding whether to continue to offer support or not. But the most important point to keep in mind is to discuss the matter with your new spouse and come to an arrangement that will benefit all concerned without draining your own resources.

Money gives people- both young and-old decision-making opportunities. Educating, motivating and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. Everyday, spending decisions can have a far more negative impact on children’s financial futures than any investment decisions they ever make. When do you start? As soon as a child can count and begin to distinguish between coins, she’s ready for her first financial strategy: Don’t eat the money. Here’s how to teach about money at each stage. Toddlers and Preschoolers At this stage, children can sort money, learn their value and begin to understand how money gets converted into “things” 5-to 10-year olds By the time they start school; many children are ready to receive allowance. The goal is to give your child the oppurtunity to budget, spend and save his own money. Most experts agree allowance should not be linked with chores or grades. Extra money for special jobs such as cutting your lane is fine.

The amount of the allowance depends on which expenses the child is expected to pay, so sit down with your child and map out a weekly or monthly budget. One suggestion is to pay some amount of money for each week of the child’s age. You can encourage saving by dividing the allowance among piggy banks. Money in jar 1 can be spent on whatever the child chooses to like toys, books or any other thing. Money in jar 2 can be used for long term savings such as college fund. Money in jar 3 can be used for investments. Give the money consistently every week and don’t take it away as a form of punishment Age 11 to 14 Increase the child’s allowance and responsibilities each year, and provide opportunities to earn extra money from additional chores. Help your child save and talk about how they can save for what they want most. Give them lessons on investment Age 15 to 20 Start to set goals. Invite your child into family budgeting and planning discussions. Talk about short- and long -term goals , such as University education. Help your child achieve independence by opening a savings account with an ATM card. Encourage them to get jobs outside the home.

Include them in decisions about significant future events such as their education and how the family would pay for it. As children grow, they become more independent in many ways, including financially. in the tween and teen years, youths have more responsibilities to earn money on their own. From household chores to odd jobs for the neighbours, children may be enthusiastic about earning money. they begin desiring what their friends have; the latest electronic device, specific clothing, cell phone, music, etc. This may be time to expand his or her resources, a visit to the bank would teach about will teach about interest and saving options. Getting into the habit of depositing earnings into a savings account can help your child build a lifelong way of managing money. It is important that the teenager learns the importance of earning” their incomes just like mom and dad do. Try to raise your children right and teach them values, and while morals and ethics are important, it’s important to be sure that they learn about money and finances.

We’ve all heard horror stories about older teens and young adults mismanaging their finances so badly that they incur mountains of debt by their mid-twenties. Those that get into trouble generally lay blame at the door of predatory credit card companies or huge college loans. In fact, we parents can take steps right now to help our children avoid many financial traps and learn to handle their money responsibly. We can help them avoid the bad start that comes with poor credit. As with most important life skills, the teaching starts almost at birth, and the sooner you start, the better off your child will be.

It can be tough to teach about money matters when you don’t have the cash for practical lessons, but skills such as these truly are built from infancy. It’s a very sound idea to move this teaching high on your priority list and help give your kids the very best possible start on the road to financial success.

Start from the beginning. You, the parents, need to be setting the best possible example. Make sure that you are running your household on a written, planned budget. This not only will show your children how it is done, but it will also help you have the bits of cash you will want for allowances and even college savings plans. The less money you have, the greater your need for a sound spending plan!

Not sure how to begin? Here are the basics: Start by writing down what you spend each day for one to three months. Account for EVERYTHING. This is one time when it’s good to be obsessive. After you have an idea about where your money goes, categorize your expenses. Don’t forget to account for quarterly and annual bills. If the bills are larger than your paycheck, you either need to cut back on some optional expenses, or reduce what you pay by shopping with coupons or looking for bargains. And as you budget, set aside a few dollars to use to teach your child financial skills. It’s well worth skipping a sandwich out, a few cups of coffee, or a case of pop each week.

Once your own financial house is in order, focus on the kids. What and how to teach will depend strongly on their age and stage. Little children, for example, need to start with little bits of money. Open a child’s savings account at your local bank. Most will allow a minor to hold an account with no minimum balance to encourage kids to save. Require that a certain percentage of all money the child gets go into the savings account. Many families use 50%. For some, donation to the church or a charity is also an important habit to build, and these parents require that 10% of any income be given to a good cause. That will leave 40% or so for your child to use as he or she sees fit.

Where can little children get money? Many times, it comes inside of birthday and holiday cards. It’s also a good idea to set up a list of chores that can be paid with a few coins around your house. Many parents have good luck with giving a small weekly allowance in exchange for routine chores and separate payment for unusual effort around the house. For example, when the kids were little, we paid them fifty cents for doing small loads of dishes by hand. They wrote their chores on a note posted on the fridge, and money was doled out at the end of the week according to who put the most effort into housekeeping.

As children grow, so should their financial responsibility. Allow them to use “their” money as they see fit (within reason!), but also you can consider giving them their share of the family clothing budget each month to manage. If the budget allows $100 per month for clothing for your family of four, then it follows that each person gets roughly $25 per month. If an ambitious child spends the $75 that she saved up for a single trendy garment, then she may find herself shopping at the local Goodwill store for jeans when she accidentally rips a pair the following week. Some families also involve lunch money in the fray. If lunch at school costs $3.00 per day, the child is given $15 for the week for lunch. That allows him or her to choose an extra ice cream for dessert from time to time, but usually also means that he or she will need to pack a lunch somewhere along the way to balance the budget.

If you’ve managed to enforce the mandatory savings deposits at the bank, the youngster may have amassed several hundred dollars by middle childhood. Your job is to see that whatever of that savings necessary is preserved for a start on adult life, but some of the total should be considered discretionary for the child. This will allow the good feelings that come with saving for a dream, whether it is a new video game or a fancy pair of shoes. Every acquisition is more meaningful (and usually will be more appreciated) if children have scrounged and saved the money on their own.

In the teen-aged years, teaching fiscal responsibility takes on a new urgency. Most of us realize that our time and influence are slipping away. We need to teach those sound decision-making skills before the kids leave for school or adult life. If possible, allow your child to get a part-time job. As long as it doesn’t interfere with education or health, young people gain many, many skills from working as teens.

Consider getting your teen a debit card with parental controls. These programs allow your child to carry plastic, but at the same time help you teach responsible use of credit. Many major credit card companies and banks offer programs with prepaid cards. Set up an account with your child, reach an agreement about who is responsible for loading cash onto the card, and monitor the activity on the card to make sure it’s being used wisely.

For children who are leaving home to head off to college, you might want to discuss keeping at least one bank account in the child’s name with parents as signers. This will allow you to help out in emergencies. Consider having bills (like credit card or cell phone) and bank statements sent to your primary residence even when they are in your child’s name. This way, you will be able to monitor what’s being paid, whether payments are made on time, and whether or not fees are being incurred. Most banks and businesses offer on-line accounting, so you can use this tool, as well. Be sure that both of you understand the terms of financial contracts and that your child sets up some accounts and a credit card in just his or her name as soon as it is feasible. Paying these bills on time and in full will build your child’s credit score, and will eventually help him or her to take loans for life’s larger purchases.

And the ultimate goal, of course, is to “launch” your young adult into the world of finance without damage to either one of your credit scores. Start right now, and teach your child how to budget and manage his or her money. Help him or her to understand credit, learn to check the credit score, and get the most out of sensible credit card usage. Teach as much as you can about savings and investment, and help your child learn where to go for reliable financial advice. Stress the importance of sound money management and hopefully, your child will become successful as an adult while avoiding the pitfalls that can come with debt and credit use.

“I want to be financially independent!” Jim stated as he walked into my office. “Tell me how in ten minutes.”

“In ten words,” I responded quickly. “Win a big lottery, marry a rich someone or both.”

“I’m serious!” Jim continued when we stopped laughing at the cliché. “I’ve tried all kinds of plans, and I don’t feel I’m any closer than I was ten years ago. I’m earning more than I ever did in more ways than ever, and the goal of being financially independent seems to get further and further away. What am I doing wrong?”

Coming from someone earning a six-figure income, with a million-dollar-plus house, and all the other trimmings, it is a strange question. I’ve been asked similar questions by many others: rich, poor and everywhere in between. I’ve given many different answers, all of which have had a fair degree of success. But Jim’s “ten minute or less” got me thinking: could I give him an answer he could use in that time frame?

What could I say that would be different from what he’d heard before?

“Basic, Immediate, and Empowering . Three words that encompass all solutions to financial independence.”

The Basic

Financial independence is an emotional state. It gives a true sense of security. It might not be absolute, but safety and security are the foundation. Every thing else is built on this basic.

It sounds simple, but few people have it. It does not matter what their incomes and job security are. The are relying on others to make it so. Rich, poor, in-between, without this basic, no one ever manages to get financial independence.

The Basic rule says you need a security blanket. It is a relatively fixed amount of cash that will see you through practically all crises. You don’t pick this amount out of the air – people who do generally think in terms of millions, and realise that they can’t make it happen, and their sense of security never eventuates. You need to calculate it, based on what you feel is important.

The first thing here is to realise that no crisis lasts forever. In fact, the period will range from as little as a month, for young people, to perhaps a couple of years, for someone about to enter retirement. Calculate just how much cash you will need to survive in a very basic way for that period, and that’s how much you need for your security blanket. Then work at putting exactly that much in as safe a place as you can, where you can access it quickly, IF you ever need to.

Jim started to interrupt, but I cut him off with “It’s my ten minutes – you just listen, and then we can do the calculations.”

The Immediate

The next step is to convert the amount you calculated for your Basics into an annual figure. This represents the immediate yearly income you need to maintain yourself at the basic level. It also ensures that your security blanket stays safe.

Think about it: if you could have this amount of income, without working, and maintain your safety net, how would you feel? Most people would be very happy, if they knew they could always get that annual income.

The calculation is not complicated. If you need a safety net of, say, $10,000 for a three-month crisis, you just multiply the $10,000 by 12 and divide by 3 to get $40,000. $50,000 over 24 months gives an annualised income of $25,000 per year.

If you can get this much every year, independently of your normal wages or salary, then you really will be financially independent. It always comes as a surprise to people when they realise just how little income they need to be financially independent.

The Empowering

The third word is about how you can get the immediate income. This is where most people, when they look for financial independence, fall down. They will see large numbers, and it scares them off trying to make it happen.

The first part is to recognise that all income requires capital. Your nice salary is not just the result of you working for it, but owes its existence to a huge investment of capital by someone. If that investment disappeared, then so would your job, and your salary.

So, how much capital will it take to generate your calculated immediate income?

A basic rule of thumb for calculating a minimum acceptable rate of return on investment is to multiply the income by 20 – a 5% return. So, to get your $25,000 per year, you need a capital investment of $500,000.

As I said, the figures start to get large, and they become scary to most people. The secret to money is: “Money makes more money”. It just takes time to get as much as you need.