What is your biggest expense?
Nb: I'll write a proper post shortly...
Midweek round up
It's been a pretty big week. In particular, I've had quite a few nights out, meetings to attend, phone credit to buy, etc. The result of course is that I've spent quite a bit. I currently have $35 left from my $120 budget.
However, I don't feel like I've had a bad week. Throughout the week I have made a number of savings by spending wisely. The things I did spend money on, I feel, were worth it.
Looking forward to the next two days, I have nothing in particular to spend money on. So all being well, I will end the week with this $35 intact. That's my aim.
BlogAds logo design competition.
If anyone reading this does decide to enter, please quote me as your referer - when you win the $1000, they'll also give me $300.
Update: I've just noticed that the competition is for US residents only.
I won the Blogtending banner competition
Thanks to Meeyotch over at Blogtending for creating this excellent banner for me (love the pun!). I won it in his weekly competition (here's the question I answered). Meeyotch posts a new question every Wednesday. So be sure to stop by and have a stab at the next one.
Be sure to look out for (and click on!) this banner on the various blog traffic exchanges.
Thanks again Meeyotch!
Quick and easy money saving tip
Whenever you are about to buy something, think what you would do if that item was not available. Would you:
a) buy a equally or more expensive alternative,
b) buy a cheaper alternative, or
c) do without.
If you would do a) then just buy the item you intended to buy. If it is b) or c) then act as though the item was not available and either buy the cheaper alternative or do without.
I did this in a take-away restaurant. I saved a dollar and enjoyed the alternative meal just as much. I think I'll start using this technique more often.
If you get really good at it, you could even start imagining that your first two choices weren't available, or your first three. But probably best to start off small.
Simplified Money Management
The total amount of money available to me at any time can be thought of as a single lump sum. I've decided to simply split this lump sum into two parts. One part is the money I have allocated for expenses I know are coming up. The other part is my net worth - it is money that is not allocated for anything in particular.
I can go on for as long as I want about setting up emergency funds, short-term savings and long-term savings. But really it just boils down to what my net worth is. And my aim is simply to increase my net worth as much as I can.
In future I'll just record the total amount of money I have available to me, how much is allocated for various things, and how much is left as my net worth. That should make it easy to follow.
End of week report
Mexican food... my one weakness!
Word verification for comments added
Sorry for the added effort. Please keep the comments coming - they're what make this blog worth writing. That and the million dollars I'll have at the end of it all, of course!
Stretching your budget
Try not to touch your wage/weekly money until a day later every week. For example. If you get paid every Friday, open your wage on Saturday on week 1, Sunday on week 2, Monday on week 3 etc etc. Basically making each wage last 8 days rather than 7. After 7 weeks you will have saved an entire week's wages with truthfully, not a lot of effort. Obviously you need to take out rent and bill money as that is time dependant, so I mean to say make your disposable money last 8 days. Carry this on for a year and you'll have saved about 2 months worth of disposable income!
I really like the sound of this one. I don't know whether I'll actually use it, however. I like the convenience of starting my budget on the same day each week. Instead I've cut my budget a bit which achieves something similar. Has anyone tried Damien's method? If so, how has it worked out for you?
Thanks again Damien, and thanks for answering my question:
Changes to my budget
My budget has been working well. I've consistently come in under budget (by an average of about $50). I'm going to try reducing the amount of money I have for general expenses by $10 (I could maybe reduce it by more, but I want to take it slowly). I am also going to change the way I allocate the money I save.
Currently I have been saving $100 per week. Of this, $75 goes into savings and $25 into a holiday fund. If I come in under budget I can use the excess any way I want, though I've usually been splitting it between savings, holiday fund and an emergency fund.
Now though, I think I'm going to concentrate on building up an emergency fund (to cover unexpected payments and to provide a backup in case it takes me time to find a job after uni). I would like to have enough to cover rent and general expenses for at least 3 months. I think this can be achieved with about $3000. So my main priority at the moment is to build this $3000 emergency fund. After this I am going to move on to savings. The full $110 I save per week will be used in this way.
I will not be putting a guaranteed amount away for holidays, etc., but instead I will use any money I have left over from my weekly budget for holidays and anything else I want to spend money on (I'll call this short-term savings). This should give me sufficient incentive to continue coming in under budget.
So here's how I'll spend the $360 I get paid per week:
Rent - $130
Emergency fund - $110
General expenses - $120
Of the $676 I have already saved (my current net worth), I will allocate $107 for the remainder of this week's general expenses, $114 to kick off my short-term savings and the final $455 will start my emergency fund.
Current Net Worth - $676
When will you let the readers know about your total savings+interests?
In a previous post I calculated my net worth as $3670. However, I think it's about time to do an update (and place the total somewhere obvious on the main page of this site).
I currently have:
$2840 in my savings account,
$1185 in my current account,
$107 left in this week's allowance (yup, I didn't spend anything yesterday :),
$114 in my holiday fund.
This gives me a total of $4246. This is a clearly up on what I had before.
I've decided to make a change to the way I determine my net worth, however. I have a couple of big expenses hanging over me - my rent for the month ($570) and my tuition fees ($3000, due in January). Rather than spend time building up my net worth just to watch it get hacked back down, I'm going to deduct these amounts right from the start. I'll quote my net worth not as $4246, but as $4246-570-3000=$676. Sure this doesn't seem like much, but at least I know it is my money. And it means I can watch my net worth grow from here on. For comparison purposes, if I perform the same deduction on the net worth I calculated two weeks ago, I get $100. So my net worth has jumped $576 in two weeks. Not bad!
I'm going to wrap this one up, but I'll post another about how this affects my budget.
Mid-week pep talk
I think Monday is the best time for me to post these pep talks, since we often go out on Monday nights and hence this is when my budget can take a bit of a beating.
I've done well so far this week. Of my $130 budget, I have $107 left. This is better than I've done in previous weeks. My plan is to try and make it to Wednesday with most of that intact (I do have to spend a bit on food, however). I am probably going to stay in tonight - partly because I don't really feel like going out, and partly to save money. If I can manage that then there is a good chance that I can end the week with about $100. So that's my target.
Money saving tip - mobile phone credit
I had a missed call on my mobile this morning, from one of my friends in Halls. Normally I'd just have called her back using my mobile, or at least sent an SMS. However, I ran out of credit a few days ago, so I couldn't. I was forced to try and call her using the internal phone network here. I had no guarantee of success, but it's free. Turns out she was in her room, so I saved a bit on credit.
That reminded me that a similar thing happened yesterday. I was having a problem connecting to a web account my boss had asked me to upload some stuff to. I instinctively reached for my mobile to call him. Then I remembered I had no credit and so I sent him an email instead. I got a quick reply from him, and saved on credit too.
Just by holding off on buying credit for a couple of days, I saved maybe 2 or 3 dollars. I think I'll continue the experiment, and put off buying credit until I really need it. Even when I do buy credit, I think I will try using my phone only when absolutely necessary. I'm sure I'll get by.
Looking for a free web host
I need a free host offering the following:
* PHP and MySQL support
* At least 100Gb transfer per month, or the option to pay for an upgrade up to this level
* the ability to use my own domain name (not yet purchased)
Bonus points if it offers any of the following:
* Regular backups
* Email addresses
* Wordpress support
* Site stats
If you know of such a host, please let me know. I am happy to signup through a referral link. Thanks.
Saving without sacrifice
If, for example, I am invited out for a meal at a restaurant, I won't turn it down to save money. Instead I will go and try to save what money I can - by ordering a cheaper meal, or not having a drink with it, etc. The result is that I get an almost identical experience - a night out at a restaurant - for less money.
I think it is possible for most people, including myself, to maintain something roughly equivalent to their current quality of life, but for significantly less money. I think this can be achieved through a combination of careful spending and a bit of creativity.
I guess it all comes down to figuring what is important to you and what is not in any given situation. Taking the restaurant example, if you are mainly going for the social aspect then does it matter whether you have the steak or the pasta? If not, then pick the cheapest.
Making big money from little savings
I have read that the average amount earned by a university graduate over the course of their lifetime is about $2 million. This works out to about $66,666 per year.
If you manage to save an average of just 1% on everything you spend, you will save $666 per year. If you invested this and got a 6% return for the duration of your working life (call it 30 years), you would end up with about $55,800.
Are you prepared to squeeze your toothpaste tube a bit harder (or cut it open as Mandy suggests) for $55,800. I am.
Another saving tip
The same kind of thinking applies to a wide range of things. Other examples are: shaving foam, toothpaste, milk, sandwich spreads... the list goes on. A slightly less obvious example of the same thing is the length of your phone calls.
Use 10% less, 20% less, or more on each of these things and you'll save of money over time. And with this sort of thing, you really won't mind the difference. I can't say it bothers me having slightly less lather in my hair at shower time!
Slightly late mid-week update
I want to do the same again this week, although I feel I may be a bit too late as the week is almost up. Still, it may help.
This week has been quite a busy one - I've had 2 drinking nights and a trip to the cinema. I managed to keep my alcohol spending down to about $11 on the nights out, so that's not too bad.
All up, I have $20 left in my budget. While this is less than I would normally like, I am not too bothered this week. The reason is that I have been stocking up on a few items that were going cheap. I saved maybe $5 by buying about $40 worth of discounted items. So not only has this saved me $5 in the long run, but it means that I am actually close to finishing the week with about $60 in cash and goods. So it's almost comparable to last week.
Only two more days to go and there is nothing definite that have to spend money on, so it's not looking too bad.
The Complete Tightwad Gazette
It is a compilation of newsletters written about ways to save money (a la my razor blade in olive oil tip). Amazon also lets you read the introduction online.
Does anyone else have any recommendations for books on how to save / make money?
Trying out Blog Advance
I thought I'd take a look at some of the competing add exchange programs. One I have just started using is Blog Advance. I've been hearing good things about its support of the blogging community. As it is, it is too early for me to tell how it compares with the others.
What I do know is that they give you 50 free blog visitors when you signup. Also, at the moment they are giving away an extra 20 visits to new members who write a post about Blog Advance.
I'll post again soon and let you know how I find the service. First impressions are very good though - the quality of the blogs seems better than on some of the alternatives.
The economics of beer
I've been trying to drink a bit less. I do enjoy drinking, but I'm trying to stop myself from going beyond the point of being 'good drunk'. Most people will understand this. Your first few drinks make you feel good and relaxed. But then after things start to get messy!
I've also been trying to pay less for it. One technique is to do most of your drinking before you go out to pubs, etc. That way, you don't have to pay bar prices.
I also had a bit of a realisation this week. Normally when we buy beer we buy a 24-pack of Carlton Draught, which costs about $35 (Australian). There is something instinctive about buying Carlton that I'm sure is the result of advertising, etc. But I was looking at the prices and realised that another beer, Ice Beer, cost only $28 for 30 cans (each can containing the same amount of beer as a bottle of Carlton). I had tried it before and knew that it was about as nice (read unoffensive) as Carlton. So I could get 6 more cans of beer for 7 dollars less, with no real difference in taste!
Just goes to show that what I am naturally inclined to do may not always be the most sensible thing.
Let me know what you think of it so far...
Being smarter with money
Here's a couple of examples I've discovered recently.
About once a week I have a meeting in the city with a guy I am designing a website for. I take the train as I don't have a car. There is a choice of train tickets; I can either get a two hour ticket for $3.10, or a full day ticket for $5.90. Since travel time and the meeting take more than two hours in total, I can not do it with a single two hour ticket.
However, twice out of about eight meetings my boss has given me a lift home. So one in four times I really only needed a two hour ticket. Since I didn't know in advance that I would be getting a lift home, and since I only occasionally get such a lift, it may seem that I may as well just get the full day ticket for $5.90.
In fact I can do better. If I just buy a two hour ticket to get to the meeting then three times out of four I will need to buy another, so I'll spend $6.20 in total. But one time out of four I won't need to and will only spend $3.10. So on average it will cost me (3*$6.20 + $3.10)/4 = $5.43. Hence I would expect to save almost 50 cents per trip.
Sure 50 cents is not much. But it is about 8% cheaper than buying full day tickets. If I can save 8% on everything I spend, that is soon going to add up to a significant saving.
Here's another easy way to save money. If you use razor blades you'll know that after a while they go blunt and have to be replaced. I found out that the reason they go blunt is because they rust. Apparently if you leave your razor in a dish of olive oil when you're not using it, the rusting will occur a lot more slowly. I haven't been doing this for long enough to know exactly how much longer you get, but the place where I found this tip suggested that they can last about six times longer.
So how much do you save? Certain blades cost about $2 per blade. Without using oil, by the time you had used six blades you would have spent $12. With oil, you'd have only used one blade in that time, spending only $2. Hence you'd save $10. In fact it's about an 83% saving.
As I say, these are just two examples. I'm looking to seek out more, so please leave me a comment describing your favourite money saving techniques.
Another budget tip
TIP 8: Stock up on stuff when it's on sale
Only do this with stuff you'd would be going to buy anyway, of course...
Weekly budget report
I put $50 of the excess into my emergency fund. Another $7 went into savings and $6 into my holiday fund.
All in all, a pretty good result for the week.
More on the price of a can of coke (or a CD)
Using the $7.18 as a factor for each current $1 won't work since interest is compounded. You're dealaing with exponents, not multiplication. The cost of a CD now will cost you much more in lost opportunity cost than $20 * 7.18.
Thanks for the comment Flex. I'm not entirely sure I understand it though. I'll try to better explain how I worked it all out, using the CD as my example. Please (anyone) let me know if you can spot the error in my thinking. Thanks.
Okay, so if a CD costs $25 today, it will cost $25*1.03^30 = $60.68 in 30 years due to inflation (at 3%).
That same $25 if invested at 10% instead of spent would grow to be $25*1.1^30 = $436.24 in 30 years.
I guess this $436.24 is what we would call the lost opportunity cost . It is $436.24 in thirty years time.
Now what we can then do is work out what the equivalent of this lost opportunity cost is today, by undoing the effects of inflation. This gives us: $436.24 / 1.03^30 = $179.73.
It perhaps isn't terribly meaningful from a financial point of view to do this conversion as there is no way we could use this $179.73 today. My main thought was that the conversion gives us a good way to understand the lost opportunity cost, given that we are used to thinking about the cost of things today, instead of in thirty years time.
My calculations do in fact take compound interest into account. Up until now it has in fact all been calculated with exponents. The multiplication factor of 7.19 is actually given by (1.1/1.03)^30. The multiplication just gives us a short-hand method for carrying out the above calculation.
(nb. this is slightly different to the answer in the original post due to differences in rounding)
I think (though I may be wrong) that what Flexo was expecting to see as a result of my calculation was the lost opportunity cost in thirty years time while I was actually calculating the lost opportunity cost's equivalent today (equivalent in terms of buying power, that is).
Thanks again for the thoughtful comment Flexo.
The real cost of a can of coke
It depends on what you would have done with the dollar if you hadn't spent it.
Inflation erodes the value of the dollar over time. So in thirty years (at 3% inflation) $2.43 will be needed to buy what you could buy for a dollar today.
Hence spending a dollar now costs you less than a dollar in 30 years, if you leave your dollar coin sitting around in a drawer somewhere.
But what about if you invest the dollar. Suppose you manage to get 10% per year interest on your dollar (the stock market's historical average). Then in 30 years your dollar will have become $17.45.
Your money will have increased by a factor of 17.45/2.43 = 7.18.
I haven't yet decided on a timescale in which I plan to save my million. If I chose a timescale of 30 years (i.e. by the time I'm 55) and if I could earn 10% interest per year, then what are the implications of the factor of 7.18 increase?
Basically, any dollar I save now would actually give me the equivalent spending power of $7.18 (in today's money) in 30 years time. And so any dollar I spend would effectively cost me $7.18.
This gives an interesting way to look at my day-to-day purchases. Am I really prepared to pay $2.20 * 7.18 = $15.80 for a can of coke? Probably not. And am I prepared to pay $25 * 7.18 = $179.50 for a CD? Again, probably not.
So if you want a way to talk yourself out of unnecessary purchases just think about what it is really costing you.
I AM a blog nerd!
I hadn't told any of my real-world friends about my blog as I was waiting until I fixed up the template and made it look half-decent. But yesterday I posted a comment on Jill and Rusty's blog and accidently posted it using my blogger name - giving a link to this site. Next thing I know, Mel is posting comments on my site and Jill is calling me a blog nerd!
Anyway, great to have you here guys! Also, for everyone else, check out Mel's blog. There's been a full-scale comment war going on over there.
More budget tips
TIP 4: Have a goal
Decide exactly why you want to save money. What are you saving for and how much will you need? This way you can see the benefit of your budget. For instance, I am saving up to take a train ride from Melbourne up to Alice Springs and on to Darwin at Christmas time. I know how much I need and know that if I stick to the budget I will have enough to go. It really is a great incentive to keep saving.
TIP 5: Reward yourself
Your budget will be that much easier to achieve if you reward good behaviour. If you finish the week under budget, put some of the remaining money towards something you really want. Oh, and use the rest to top up your savings!
TIP 6: Pay yourself first
At the start of your budget week take however much of your income you wish to save and put it out of reach (in a savings account, in a sealed money jar, etc.). That way it won't be lying around tempting you to spend it.
TIP 7: Keep it simple
It may seem that making a successful budget (by following my tips, of course) is going to be horribly complicated, with lots of book keeping required. This is not really the case. Which is lucky, since the more complicated a budget the less likely that you'll stick to it.
In a typical week, here is how I manage my budget. My scholarship gets paid into my current account. I then take out $230. I put $25 into a sealed tin marked holiday money. I put $75 into a sealed tin marked savings. I then use the remaining $130 to live off for the week. I don't have any written plan of how I spend this $130 - I just informally decide how to allocate the money based on what events are happening that week. And that's basically it. I pay rent direct from my checking account and I periodically empty my savings tin and deposit it in a savings account.
The setup of the budget can be as complicated as you like, since you only have to do it once. But once you've done it, make sure the resulting budget is really easy to follow.
Tips for making a budget
I've been testing various budget ideas for a while to find out what works and what doesn't. Here are some of my top tips:
TIP 1: Set your budget at a slightly uncomfortable level.
If the amount of money your budget allows you to spend is too high, you won't get any benefit. You will just carry on spending as you did without the budget. You'll know your budget is too generous if you feel entirely comfortable sticking too it.
If the amount of money your budget allows is too low, you won't be able to stick to it. Sticking to it would require a drastic change in your lifestyle, which is a hard thing to deal with. You'll know your budget is too tight if you feel uncomfortable trying to stick with the budget.
The ideal situation, as I see it, is that you should feel slightly uncomfortable. This way you will have to make a few cut-backs (spend slightly less on groceries, have one less drink on a night out) in order to meet the budget. But you'll be able to do it because it isn't that hard. And that's when you'll save money. Eventually, you should find that your lifestyle changes to match your budget. When that happens you'll find yourself becoming comfortable with the budget. You will then be able to tighten it a bit further.
TIP 2: Give yourself a weekly cash allowance
Doing your budget weekly keeps you focused on it. Holding all your money in cash and paying for everything in cash lets you see exactly how your budget is doing. It is much easier to overspend if you use a credit/debit card.
TIP 3: Take out only as much as you need
Whenever you go out somewhere - shopping, pubbing, etc. - figure out before you go how much you are willing to spend. Then take only that amount, in cash, and leave all bank cards behind. If you do this, it's simply not possible to overspend.
I'm sure I had another couple of tips to add, but I can't remember them right now. I'll post them as soon as I do.
This week's budget
My budget week starts on Thursdays and ends on Wednesdays (to coincide with payment of my scholarship). It is already Tuesday and I still have $60 left. Also, I don't actually have anything I need to spend money on for the next two days. So my plan is to hide that $60 in my drawer until Thursday morning.
Any money I don't spend in a week is being put into my emergency fund. The idea of the emergency fund is that I will be able to live on it should my main income source stop for any reason.
BlogExplosion update, and thank you
The site was approved sometime last night and by this morning I had received 87 visits. Six of you even took the time to leave me a comment - thank you so much. It is this kind of encouragement that will keep me on track with my goal.
I've been checking out each of your blogs. Hopefully you won't mind if I link to them here! In no particular order these are:
First up is Kelley who has three blogs: Last for PE, The Next Victim and Chick Books & Dimestore Romance. I particularly like The Next Victim which is a blog helping you protect yourself from scams. I'm doing a Ph.D. in computer security and am really intrigued by the sheer cunning of some of the scams out there.
The second of the six commentators is Damien. His site The Burning Question lets you submit questions which he'll then answer, such as why non-stick teflon sticks to the pan. Personally my burning question was always how spiders managed to string strands of web from one tree to another, etc. As a kid I imagined they must either crawl down one tree and up the other, keeping the strand taught, or just shoot it across spiderman style. It turns out they just let a strand blow in the breeze (keeping hold of one end) and wait until it hits and sticks to something. So I'll spare Damien from answering that one.
Third is Dr. Forbush who wrote
I want one billion dollars, because a billion is the new million. This is because of inflation of course. For example, with one million dollars and about 6% return on investment per year that is only about $60,000.00 per year. But with a billion dollars and %6 return that would be $60 million dollars per year. Now, I could live on that!
I'm with you on that one Doc. That's going to me my next target after I hit a million :) Dr. Forbush is another triple blogger: Dr. Forbush Thinks, Bring it on and Naked Politics.
The fourth comment came from lpkitten who is blogging about her attempt to get out of debt. I don't envy you one bit lp - but I really admire what you're doing. I consider myself lucky in that banks and so on viewed me as a bit of a liability and wouldn't give me credit cards and such like. While I'm starting to become sensible with money there was a time when I definitely wasn't... Also what are your plans once you get out of debt - are you going to keep on saving or will you be content just to be debt free?
Hmm... this is turning into quite a long post! Oh well..
Next is Jago whose blog is as new as mine. He seems like an interesting guy (a Russian living in Finland no less), so please visit his site and encourage him to keep posting - I'd like to hear what he's got to say. Keep at it Jago!
The final comment comes all the way from Bahrain. I have to admit that I didn't quite know where Bahrain was - so I checked it out. Bahrain is a group of 33 islands just off the east coast of Saudi Arabia and from the tourism website looks like a really nice place to visit. So maybe when I figure out how to make a million I'll come and tell you in person sillybahrainigirl!
Okay guys I'm going to wrap this one up.
Keep up the great comments!
More on Blog Explosion
So to avoid the confusion I am going to change the title. I still quite like the $1,000,000 part as this is what I am trying to obtain. I think I will probably go with something along the lines of '$1,000,000: My personal journey. $X saved so far'.
My current net worth
I currently have:
$1,900 in my savings account,
$700 in my current account,
$90 left in this week's allowance,
$130 in my emergency fund tin,
$50 in my holiday fund tin,
$800 in my savings tin.
I currently owe:
$37,000 in student loans.
This gives me a net worth of -$33,330
It's not a great situation, but it's not bad. The interest rate on my student loan is tied to inflation, so it is not going to increase dramatically over time. It more moves the goal posts slightly than makes my goal of saving $1,000,000 impossible.
To put a slightly more positive spin on things, I will track my positive income only. That is, I will say I have $3,670 towards my goal of $1,000,000. The student loans are tied to how much I earn from any job I do, and so can be regarded not as a debt, but as a future reduction in the amount of take-home pay I have from any job. If I never earned over $25,000 I wouldn't ever have to pay anything back, so to quote my net worth as -$33,330 would actually be incorrect.
So as of today I have $3,670 of my target $1,000,000.
Considering I'm a student and by all accounts shouldn't have any money at all, I'm quite pleased with that.
Using Blog Explosion
I signed up this blog and then started reading some blogs while I waited on this one to be validated. Reading randomly chosen blogs was a lot of fun. It is really zeitgeisty and you get a strange sort of snap-shot of the world.
I signed up to Blog Explosion in order to build awareness of my blog and hopefully find contacts who are similarly interested in building their personal wealth. I have only been using the service for a couple of hours and already I have found two blogs which deal with a similar topic. These are 'Karen's Personal Financial Progress Report' and 'My Money Blog'. I plan to spend some time looking through them for useful information and perhaps make contact with the authors. I have already found a link on Karen's blog to Net Worth IQ which allows you to graph your net worth. I had been thinking about how I could add this to my site, so already I'm seeing the benefit of Blog Explosion.
Unfortunately my blog was refused by Blog Explosion for the reason that it 'primarily contain[s] advertising, or promote[s] business opportunities'. As I'm not promoting any business opportunities, it must be a reference to the Google AdSense links I placed on the page. I placed a link unit just above the top post and an ad unit down the left hand side of the page. I thought that the advertising was kept sufficiently subtle that it did not detract from the main purpose of the blog which is to record my financial progress. However, Blog Explosion do not agree.
As I am genuinely interested in using Blog Explosion to make contact with other financial bloggers, I have significantly cut back on advertising. I have left only a single ad unit containing two adverts. This is blended in with the colour scheme of the site. I am now going to resubmit my site to BE and hopefully have it accepted.
Creating a budget
So I have $360 per week. Of this $130 is immediately consumed by rent. At the moment I am living in halls of residence on the university campus which is pretty expensive. I'm planning on moving into private accommodation in December, which should work out a fair bit cheaper (perhaps $30-$40 per week). But for now I'm stuck with $130 per week rent.
The remaining $230 must cover everything else. For day to day expenses I have given myself a budget of $130 - to cover food, entertainment, etc. I'm saving the remaining $100. $25 of this goes into a holiday fund. The remaining $75 goes into long-term savings.
There is a bit of a short-coming with this budget in that there is no provision made for irregular (non-weekly) expenses. I am going to deal with this in the following way. If I can cover it within budget for day-to-day expenses I will. If not then initially I will use my long-term savings (not something I'll do willingly). In the longer term, however, I plan to try save a small amount of my $130 each week to build up an emergency buffer. This buffer should eventually remove the need to dip into my savings at all.
While my income is nothing fantastic, if all goes well I'll end up with a holiday fund, long-term savings and an emergency fund. I'll also develop the habit of living on $130 per week in expenses. When I graduate and (hopefully) get a real job, I'll be able to continue living on $130 and will be able to save the rest.
I developed this budget over a week ago (though after a couple of months of trial and error). The first week into my budget, despite being a relatively expensive week, I managed to come in $13 UNDER budget. I've placed this $13 into my emergency fund (which I was initially able to seed with about $200). So far so good.
Why I want one million dollars
I'd love to say that as soon as I get it I'll rush out and buy ferarris and yachts. But I won't. There is something I want more. My freedom.
At the moment I have to work to ensure I have enough money for food, etc. This work places a big commitment on my time. I, like most people, lose about 8 hours per day to work. During this time I'm not free to do as I please. And during this time I'm making money for other people and only managing to skim of a small fraction of the value I produce for myself. While I can put up with this kind of life, I don't want to.
My plan is to achieve financial independence. Basically I wish to own enough money to be able to live comfortably off the interest alone. I don't expect to make so much money that I can go out spending lavishly on whatever I want. But that's okay. I just want enough to be able to live, pursue my interests and do a reasonable amount of travelling.
So how much money do I need to have before I can achieve this. Taking into account inflation, I think one million will serve that goal if I earn it within the next 30 years. Anything after that and I'll probably need more. Even towards the end of those 30 years it will only be enough to just get by on, but I'll probably retire on it anyway. The sooner I earn it, the better the lifestyle I will have once I am free.
I'll discuss all of this in more detail later, but for now just know that I plan to take control over my life and getting a million dollars quickly is a big part of that plan.
Some things to do
As I already mentioned, I want to figure out my net worth. This is going to be how I record my progress. I want to end up with a net worth of A$1,000,000.
Basically net worth measures how much of your income is actually yours. You subtract everything you owe from everything you own and that's your net worth. For instance, I currently have a very few thousand dollars in my bank accounts, or in cash. However since I owe student loans, rent, etc. this money isn't really mine - it's just on loan. Overall, I'm in debt.
The second thing I want to do is sort out a budget based on my current income and start saving what I can.
Third I want to start generating ideas for new sources of income.
Finally, I want to modify the template for this site to make it look a bit better.
The road to a million - an introduction
At the moment that goal is very far away. One of my first steps is going to be to work out my current net worth. I don't have an exact figure at the moment, but thanks to some hefty student loans it is somewhere south of zero. About £15,000 south.
As you may have noticed I talk in pounds - I'm from Scotland. I'm now doing a Ph.D. in Australia, however. This leaves me with the decision of which currency I am planning to become a millionaire in. At about 2.5 Australian dollars to the pound it is going to be a lot easier to become an Australian millionaire, so I'm going to do that first. From the point of the view of you, the reader, this will also make it easier to understand my progress as, for the time being at least, any references to my day-to-day finances will be in Aussie dollars. Unfortunately this move places me instantly further from my goal - I'm now about A$37,500 south of zero!
There are a number of reasons for creating this blog. First, I'd like somewhere to track my progress and to record ideas about getting there quicker. Second, I hope to share knowledge I aquire along the way with anyone else interested in making a million. Third, I hope to make contact with those potential millionaires and learn from them / share stories. Fourth and finally, I'm holding out the tiniest shred of hope that I may be able to make a couple of my million dollars by placing some (hopefully tasteful and useful) adverts on its pages.
Oh and I want to have a bit of fun, so it ain't all going to be budgeting. Stay tuned for tales of cheap holidays, home-brew alcohol and much more...
So thanks for reading this post. If you are interested at all in making your own million or if you have any advice for me, I'd love to hear from you.
Look forward to getting rich with you.