Tuesday, March 16, 2010
Pake Does Not Mean Cheap
While in college, I worked full-time earning a meager $4.55/hour. There wasn't much discretionary income left after paying the rent...and I didn't even own a TV until I entered active duty in the Air Force in 1989. We still have that TV, a 25 inch RCA I bought at the Los Angeles Air Force Base BX. Although by today's standards it's small, back then it was a good sized television….and reliable, 21 years old and still running. Well, I just bought a new 52" LCD flat screen TV. My wife and kids were shocked...really shocked. They questioned my sanity and openly wondered who I was and what I did with their father/husband. My brothers asked what happened to our TV. They assumed it finally died and were surprised to find out I was replacing a perfectly good television.
Rest assured, I have not fallen off my rocker. I work as a sales engineer and significantly exceeded my quota in 2009, so I decided to spend a small percentage of my final commission check on toys for the family. I figured it was time to reward myself for all the hard work...and reward the family for putting up with all my long hours and travel over the years. But, the rest of the cash is in the bank and we're back on our budget.
I think it's very important for people to manage their money wisely, balance their income and expenses, develop a savings balance, and make investments for the future. I read an article on Yahoo News regarding a few professional athletes who earned hundreds of millions of dollars during their careers, but were bankrupt and penniless today. They started out living meager, humble lives, made millions, spent millions, and returned to their humble beginnings. It's sad to see, but too many people across America are doing exactly the same thing, albeit on a smaller scale.
There's a saying, "there are two ways to become rich, make more or spend less." With the economy in its current state, this saying can be slightly modified to read, "there are two ways to make ends meet, make more or spend less." Personally, I like to do both, make more and spend less...and put more money in the savings account for security. I'm not a financial planning expert, but I have a few common sense tips to help you do both.
1. Making More:
Pick your career field wisely: The bottom line is the purpose of a job is to pay the bills. I'm all for job satisfaction and finding a career I'm passionate about, but studies have shown there are more hungry musicians than there are hungry engineers (or doctors, computer programmers, etc.). If you decide to become a professional musician, more power to you…but refer to the section below on spending less.
Earn your degree: All things being equal, an employer will hire a candidate with a college degree over one without a degree. If you've completed your bachelor's degree, pursue a master's degree or professional certification in your field. Some companies will increase one's compensation based on the successful completion of an advanced degree or professional certification.
Get the "right" education: In my opinion, the primary purpose of post-secondary education is to enable one to make more money. Get a degree in business, engineering, computer science, nursing, pharmacy, etc. Generally speaking, a bachelor's degree in fine arts will not translate into more money for the rent. In other words, a McDonald's cashier with a fine arts degree earns just as much money as a McDonald's cashier without a degree…and the one with a degree has a massive student loan to pay back.
Work hard: Do not blend in with your co-workers and do not lower yourself to their standards. Get into the office early, leave the office late, and do the things that distinguish you from your co-workers. This sometimes affects the work-home balance, but if you want to make more money, it's going to require personal sacrifices.
2. Spending Less:
If you don't need it, don't get it: Before you buy anything, ask yourself, "Do I need it?" It doesn't matter what it is, a car, a cute dress, a new cell phone, a pair of shoes, or even a new pen. One might think this is a bit austere, but let's face it, in today's economy there are probably millions of people who should be asking themselves this question.
If you want it, don't get it (now): Impulse buying is the number one cause of "buyers remorse." It's also the number one cause of credit card debt. If you want something, sleep on it overnight. In fact, sleep on it for a month. Chances are, the feeling will go away….or there will be five other things that come up that you will want even more.
Prioritize: Create a list of needs and wants, then prioritize this list. Whenever you want something new, compare it to the list and see if you want it more than what's on your list. Prioritizing allows one to spend a little money on the more important or desired items, rather than a lot of money on everything.
Save: Once you have excess cash (from following the rules above), stick your money in the bank. Better yet, distribute your funds across a portfolio of investment instruments. If you want to treat yourself, spend 10% and put 90% in the bank.
Here's our awesome RCA TV, 21 years young and still running like a champ. We're trying to donate it so someone can enjoy it for the next 21 years. If you know anyone that can use it, let us know. It's a high quality product, made in America, back when America knew how to build things. Now everything is manufactured in China....for better or for worse.
Posted by Wayne Kodama