I love this title. Many may be wondering what is the Economy Chief talking about? Isn’t he all about saving and obtaining independence. I am but that is why some times we are so quick to jump to conclusions when we read a title of an article or a book that we miss the whole pciture. Even when we see people we are quick to judge without really knowing them.
What I am talking about is getting rid of all your money immediately. Get it out of your hands and out of your checking accounts. The quicker you get that money from accounts that you have easy access to or worse, in your wallet the faster you will spend it.
Establish a separate account today, right now. If you can setup an investment account like a brokerage account where you have this money the better. Invest it in a mutual fund or some solid stocks. The point here is to have multiple accounts.
This way, when someone asks you, do you have any money I can borrow. You know who I am talking about. That cousin, that brother or that uncle who is always broke. Always looking for someone in the family who is doing well to ask money for.
Lend your money to a relative or a friend and say goodbye to either that friendship or the money. You pick which one. Christmas dinners and birthday parties will not be the same.
I have several accounts. Investment accounts, emergency fund account, trust accounts for the kids, 529 college savings plans for my two kids and life insurance with cash value that is invested. The key, like I said, is to have many buckets of savings and accounts.
Dispose of the money right away.
Vacation Thoughts
If you have $10,000 sitting there in the checking account you are tempted to start thinking “we need a vacation.” But if that $10,000 is in the stock market you now suddenly do not need a vacation.
Now even if the market goes down, you cannot take a vacation because you cannot sell, I have to wait until the market turns and it is positive.
If the market is up, now you start to like those values as you see your net worth go up you start to tell yourself, maybe I do not need that vacation. That means I will lose on the opportunity to make more money if the market continues to go up.
See how the psychology works.
New Car Thoughts
Same thing with money that is sitting idle there not doing anything. Now you are start to think about, maybe I need a better car. Maybe I can upgrade.
Even if you are car is in great shape and it takes you to from point A to point B, you want to replace it.
Wallet
The most I carry in my wallet is $20. I pay with my credit card, which as you all know, I pay all the balance at the end of the month. Any excess cash or savings from my passive and business income, I move it all immediately to the investment account. Get it out of my eyes.
I also have systematic investments to all my investment accounts. I lowered the monthly investment to my kids’ trust account because I want to put more into the 529 accounts. My son is 8 so in 9 years he will be off to college. I have to get that account to at least pay for the 4 year cost for him to live on campus. If he wants to get Masters or Doctorate then I can finance that with my passive income (rental property). Same for my youngest daughter.
But instead of eliminating the monthly contributions I lowered it. Never, never stop making automatic contributions to an account you already established. Even if it is $10 a month that you contribute, do not eliminate it.
Remember what I have written in the past about. Replace bad habits with good habits. If you eliminate the automatic contributions (good habits) you will replace it with a buying things you do not need (bad habits). It is all about discipline.
Look what $1,000 in a savings account does if we continue to contribute $200 a month for 10 years. Assuming we get an average 10% return from the S&P 500.
That is $42,885. Nice. In ten years that is a down payment for a house.
I know people who buy cars, not even new, that are paying $500 a month for five years. And they also put down a $2,000 down payment. Silly.
Let see how that would look like if you put $2,000 and $500 a month. How much do we have in 5 years?
Look at that. It is almost the same as the previous scenario for 10 years with $200 a month. You can buy a new car in 5 years for $21,000 and you still have $20,000 left in the investment account making more money. See how that works.
Tips to Dispose Money Quickly
- Setup automatic monthly or weekly contributions to investment and savings accounts
- Imagine like you don’t have any money
- When relatives or friends ask for money, you don’t have any (why? well it is all in investment accounts that you cannot touch)
- Set a budget on what you will spend on certain things like entertainment or dinners (stick to it)
- Establish as many accounts as you can, this way you feel like you have many buckets where to put money into. Also makes you feel like you have a lot of money even if you have say, $2,000 in each account.
- Keep in the checking account only the amount you need to pay bills within in a week. If you need more transfer from the investment account to the checking
- Link the investment account to the checking account but limit the number of transactions you make to transfer money from the investment account to the checking account.
Money is not everything like I have told many. But it is the tool and instrument that we have in this world of economics and game. We need to beat it. I love economics and I am a true capitalist. I am sure if I were to live in a socialist country I would love socialism and would find a way to win that game too.
The tools that are given to us is what we have. Do not complain or nag. Everyone, at least in my country, USA, we have the same opportunities to beat the game. If you cannot play it or beat it, that is your problem.
Sincerely,
Economy Chief
What to read a brief bio of the Economy Chief? Sure. Click Here – Economy Chief bio.
Great advice! I was unsure of what to do with a work bonus and let it sit in my savings account for entirely too long, for a net profit of about eight cents interest (while the market soared). I considered it sort of an opportunity fund at the time, but the opportunity cost usually ends up being greater.
Absolutely. The opportunity cost of money that is just sitting there can be quite high. Best to put that money to work. Invest it and forget it for a long, long time. Before you know it, you have a nice account value. Time is our friend not our enemy.