Ripley’s World: The First Steps To More Money, Part I

Where am I right now and which direction am I headed?

You struggle with your finances and would like to have more. But you can only improve if you have a clear definition of what works for you. Simply wishing “I would like to have more” does not really work. You need a structure, a goal and a purpose.

Thus, you can use these three steps:

     1. Record where you are now.

     2. Record where you want to go.

     3. Ask yourself how YOU can achieve it.

You see, totally easy. And yes, I am serious, it IS easy. A sample of how it works?

     1. I have zero cars.

     2. I want to have one car.

     3. I will buy 1 car.

The way is simple. It is more important to figure out that you are missing the car and you’d like to have one. In this case rather simple, but perhaps there are other objects that could facilitate or improve your life. And maybe it could be a bit more specific than “I’ll buy one car”. We shall see. The topic is not “more cars”, but “more money”, which can lead to more cars – if that is one of your goals. For “more money” you mainly want to think about one value: HOW much more money do I wanna have? Second, you need to be motivated to invest more energy and work into something that yields you more money. Nobody buys a product without realizing its benefits. You need to recognize the benefits of having “more money”, otherwise you won’t buy the product named “more effort”.

So take step #1 from above. How does your financial life look like in terms of goods and services? Check your bank statements and enter the values into a table. Do not let yourself be guided by your feelings, they will lead you astray. Only real numbers lead to real results. Take all the time you need. Superficial effort will lead to superficial results. In that case, neither this article nor any other assistance will lead you to success. The main reason for an unsuccessful existence is to never really think about success. Simply wanting to be the richest duck in the world will not result in a vault full of money. Painting a wall ends when the last inch is covered, not when your desire or patience runs dry. The pen moment. Accept the facts.

So take your bank statements – hopefully from all recent twelve months, and write EVERY transaction you made into a list. Try to use meaningful categories to summarize your expenses. “Hobbies” may be one, “Going Out” includes both the beer after work and the steak on the weekend. The more accurate the table, the better you can diversify later. The more comprehensive your analysis, the more confusing it could become – but the more possibilities you have to look at specific details later. If you know a thing or two about spreadsheets (e.g. Excel), you could even write a small macro. Small! remember: not the program is the goal, but its content later on. Don’t invest time into things that make no sense.

Table I Blogpost #2

If you skip this step, please stop reading. You insult this post and yourself by investing time into something that is of no use to you. Read comics instead. If you needed just 10 minutes to create this table, ask yourself – is this all the time your life is worth to you? You may enjoy reading the “pen moment” again.

Fill this table with life. Go through your bank accounts and think about the columns in which you could put your expenses. Set up separate points that are meaningful to you. This will be a bit exhausting for the first month. The second month is usually easier – the categories rarely change on a month-to-month base. Once you have captured all 12 months of the year, check the table. If you like numbers, you can come up with a little formula that automatically calculates the percentage of your net income that you spend in each category. You’ll probably find that you spend 33% – 50% of your income for “living” – independent whether you rent or own your apartment.

What exactly does this table tell you now? First of all, you can see how much money you spend – perhaps even more than you earn? A fact not known to everyone. Many people creep into debt by spending only a few dollars more than they earn each month. A gradual but steady decline.

Look for the values that jump out to you. Maybe scare you. Does a particular expense sound way too much for the corresponding item? Do you spend too much money on your car? For food? For activities? For anything? Think about whether it makes sense to change this number in order to balance your budget. Can you change it? Yes, you can. “I need a car” may be true, I also don’t like using public transport – but how can this change look like?

A simple example: You drive a car, perhaps a larger model, which is often financed. You pay a monthly rate in the amount of $300. And this vehicle consumes $100 in gasoline per month. Add $50 for insurance and taxes. Inspections and maintenance again: $50. $500 in total for this vehicle. Per month.

Have you saved a couple thousand bucks and can perhaps pay cash for an older, used model? Or do you want to keep driving brand new vehicles, but could be happy with a smaller car? Maybe you’d pay only $200/month in financing. And only $80 in gasoline each month. Insurance and maintenance may also be cheaper: $40 instead of $50 each. Total price per month: $360. Now you have $140 more available each month and did not limit yourself. You are still mobile, you drive the same routes, you use the same amenities. Only a size smaller. If your ego can not cope with that, you have another problem… but you have discovered a potential for savings.

Go through your expenses in the following way:

     1. Do I have to reduce a certain amount?

     2. Do I want to reduce a certain amount?

     3. Can I reduce a certain amount?

This order is not arbitrary. If you spend more than you earn, MUST comes first. It won’t go on for much longer. Don’t use the excuse “things will get better”. Enter reality. This list IS reality. Accept it. Next, focus on what you WANT to change. After that, look at what you CAN reduce – some items just aren’t negotiable. At least not directly. You gotta pay your rent. You COULD, though, move into a cheaper apartment, maybe with a room-mate – or if you live in a big city, you could move into the periphery. Change here won’t happen over night, but it could still be fast. Loans are another example. You can’t neglect the payments, but maybe you could apply for a longer duration? Stretching the life of the loan is not the best practise, but it could be a way if a lower monthly installment helps you.

Take your time to consider reality and evaluate your financial world.

After you have done that, come up with a separate plan – regardless of your current situation. How would you like to live? I just wrote that your current car costs $500, you could reduce the cost to $360, but in reality you’d like to drive a car that would cost you $800. Now add another column to your table, so that it looks like this:

Table II Blogpost #2

Think about more categories that are not yet included. Maybe you had no holidays in the past 12 months? Thus, you are missing the item “holiday” on your list. Let’s add this and think about how you want your vacation to be. “I would like to have an annual holiday that will cost me $3,600.” Ok: $ 3,600 divided by 12 month = $300. Each month. Enter it into the table.

Draw a line and sum up the expenses of your dream life per month.

IF this number is greater than what you earn right now, you are hungry for success.

Read my next post, which will be called:

Earning more is greater than saving more!

Ways and means to make more money…

Or go back to the main menu: