Thursday, January 8, 2015

Balanced Money Formula

I am a personal finance nerd.  I have a host of nerdy hobbies (outer space, chemistry, knitting), but personal finance holds a special fascination for me.  I love it; so much so, that I consider personal finance to be more of an enjoyable hobby than merely a necessity.  I love that personal finance is based on fundamentally simple concepts that can be applied at the most basic level or, if desired, can be extrapolated to become as complex as you want to make it.  And let’s face it – I like the complex.  So many options, so little time.

With every PF decision that I make, I always end up coming back to the balanced money formula:  Wealth = Income – Expenses.   My ultimate goal is to build wealth (and retire early, live on a beach, sip cocktails, etc.), and according to the Balance Money Formula, there are two simple factors under my control that can help me achieve my goal(s).  I can either increase my income or decrease my expenses.  Easy-peasy, on the surface.  Either of these things will result in an overall increase in wealth; doing both is better.  

I feel like I’m pretty good at keeping my expenses in check.  My fiancé and I both tend to err on the side of frugal.  We drive reliable, moderately priced cars that are completely paid off.  We only go out to eat a couple of times a week and only to inexpensive restaurants.  We shop with coupons and at discount retailers.  There are definitely many other things we could be doing to decrease expenses.  However, for now, I have little intention of changing our spending habits.  We spend less than we earn and are able to live comfortably without seeing much by way of lifestyle inflation.  I’m going to put a pin in this topic for now because I just don’t have much to say about it.  Steady goes the course for expenses.

I consider income to be a whole different ball game from expenses.  Expenses feel limiting to me, while income feels exciting.  The world is my oyster when it comes to prospects to increase income, if I can just get creative.  However, up until recently, I have really not been very creative with regards to income.  My fiancé and I both work demanding, yet lucrative, day jobs that keep us comfortable and let us build our savings.  Every spare penny after expenses gets stashed in a bank account where it slowly grows at a pitiful interest rate.  I still get a thrill when I see the numbers go up every month; compound interest is magical, after all.  But there’s nothing terribly exciting about my day job, and there’s nothing terribly exciting about a savings account.

Lately, I’ve been looking for new ways to boost my income, and subsequently boost my wealth.  I have historically subscribed to the conventional wisdom – work hard, get paid, save 10%, repeat.  However, as times change, so does the conventional wisdom.  I’m not starting at square one, but I definitely have a lot of exploring to do.  Adventure is out there!  And with a little luck, maybe some money too. 

1 comment:

  1. Hey Britni, nice post! I'm going to keep reading some of your things, even though I'm not a girl.