Two ways to be rich….

There are two ways to be rich.

The first is to have a lot of money and the second is to have very few needs. This is what my dad always told me growing up. It is probably the reason that I have always kept my expenses very low. There is extreme freedom in not having high overhead.

Long gone are the days when I can pack everything I own in the back of my pickup truck and move at the drop of a hat, but I try to keep a semblance of that mentality.

Think about this: People do not really want a lot of money. You do not really want more money.

What everyone, including you and me, really wants is what they think money will do for them. Usually this is freedom, security and happiness. It certainly is in my case. What use is a lot of small green pieces of paper anyway?

By becoming resilient and reducing expenses you can have all that.

I was talking to an acquaintance last week who I’ll call Eric. Eric confided in me that he has made over $500,000 a year for a few years . That’s pretty good scratch in my book! Of course he has no life because he works his ass off all the time. When he told me this I thought to myself ”Well, that sucks. Who wants to have a life with no free time?” But it gets worse.

I asked him about his savings, because I figured he must have a good plan. He could sock away a lot of money if he makes a half million a year. If I made that kind of cash I like to think I would save most of it and use the savings to buy some serious cash flowing assets. After a few years I’d be set for life and I could get back to surfing, mountain biking and hanging out with my family.

But Eric told me his entire net worth was less than $100,000. And I got the feeling that he didn’t really know what he was talking about. I don’t think he has a firm grasp of his own finances. So it might be even less, or even negative.

“Dude!” I said. ”What the F%^K? You need to get your sh$t together.”

So we started talking about moving to Panama and reducing his expenditures etc. And I hope I helped him “see the light”

Here is someone who is making a ton of money, but has no freedom, no plan and no security.

So what can we do to make sure we do not fall into the trap of climbing a ladder only to get to the top and realize that we climbed the wrong building?

An excellent first step is to get an honest assessment of your current financial picture. Take a snapshot of your current financial life.

I have a spreadsheet I made on excel that has all my assets, liabilities and income. It’s pretty easy. Each year on January 1 I start a new page. I then plot my net worth, passive income and financial holdings in a chart. If the lines are going up Yippeee! If not I need to do some assessing.

You can find info on doing a financial sheet on-line easily and it is great idea because in order to figure out where you are going, it helps to know where you are starting from.

What is also great about this is it allows you to play out “what if” scenarios very easily. “What if I were to sell this property for this much and put this much towards this loan, how would that affect my monthly cash flow?” “What if I sold this car that has a payment and bought a cheaper one?” It will help you make better financial decisions.

Remember that it is easier to put on comfortable slippers than it is to carpet the world.

Instead of trying to make enough money to buy everything you think you want, maybe try simplifying your life and enjoying what is all around.

By becoming more resilient your life will be much more carpeted.

Foralbert

Is your Spreadsheet available ?? Sounds like a GREAT focusing tool !
Anthony Thomas

You can make your own spreadsheet on Google Docs… When I rebooted, I didn’t make much before that, about $17K in 2009. You need roughly double that to live comfortably in Los Angeles. My average income from 2000-2010 is roughly $20K a year. Some years I made more, other years I made nothing (unemployed).
So starting with allowing myself to be fired or quit, however you want to put it from my low wage (stagnant wages) service sector job. I decided I need a drastic change if I wanted to move to the next level which is having a home, wife and children.

I never attended expensive colleges. I always look to pick up skills on the cheap. I recently completed A+ certification, but already had a wealth of computer knowledge I just didn’t have any “proof”. Now I have that and looking to add onto that so I will increase from what the average A+ tech gets which is about $12-14 an hour. An improvement of $2-4 over my last position for an investment of $120 school + $158 for the testing. I can make back that investment with my first paycheck! In fact, I’ve made it back just donating Plasma ($300-$355 a month).

Along with food and shelter, I would count transportation and communications among the must haves.

There several ways to get a smart phone and mobile (3G) internet access almost anywhere in the world. I will not share that info, you can find it on Google. But there’s no reason you have to pay more than $40 for unlimited data, text and call minutes. The phones are less than $200 which can be gotten with one month’s worth of visits to donate Plasma or by terminating your current cell contract.

To truly “Cut The Cable Cord” you need high bandwidth internet. Which is cheaper? 20MB Fiber-To-Home (ViOS or U-Verse) or All You Can Eat (but don’t even watch half the channels) Cable/Sat Service (usually $70+ a month). Especially with cable, if you include box rental, it can easily be $80-$90 a month.

A Home Theater PC can be built for $250 in parts (or less), use little power (20W or less at idle and less than 60W at High CPU usage). Even then if you add up your cable/sat bill from Jan-Dec, you can build a very high end HTPC, send back the cable box and save that money or you can totally depend on err, “downloads”, streaming and local HD channels (with a good antenna 70-100 channels).

If your on a fixed income, I would highly recommend living in a country with a 4:1 or better exchange rate with the dollar. You mentioned Panama but its tied to the US dollar. For somebody that isn’t close to retirement age, there isn’t any advantage to living there IMHO. You can live in a country with an even better exchange rate. A friend of mine is renting an apartment (not a room) in Mexicali for $125 a month. Short of staying with your parents, you can’t repeat that in America save for maybe a rural area???? Google Cheapest Places to Live in the World and you’ll find countries like India, Ecuador, Belarus and Ukraine on it. Depending on what your needs are (Peanut Butter is impossible to find in Ukraine for example) you should visit the country your interested in.