The answer seems pretty obvious, but I though it might help me to write it down, quantify it a little so I can see how we progress.
I see it as three phases: Stability, Lifestyle and Sufficiency. The goal is to progress though these. They can be measured by four variables:
A is total net earned income, from our jobs.
B is investment income and interest. This will include pensions when they eventually become payable.
C is additional income. Surveys, online income, the other bits we blog about here.
D is spending. That's our bills, mortgage, groceries, holidays, going out, hobbies, everything.
Phase 1: Stability
You are in the stability phase if your total income exceeds your total expenditure, but your expenditure is less than you would like it to be.
A + B +C > D
Here, you're making a gain every month, putting money into savings. You'd like to live in a bigger house, go on more holidays, eat out more often, but you moderate these things to stay in surplus.
As Mr Micawber said "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Keep working hard, earning more money, keep an eye on your budget. The bigger you make that surplus every month, the faster you can make B grow, to help you move on to phase 2.
Phase 2: Lifestyle
Ok, you've worked hard, earned the promotions and pay rises; you've saved hard and got some nice investment income trickling through. Your surplus is getting bigger. Maybe it's time to live a little. So now you can start to increase D. You get the things you've been denying yourself, move to the dream house, have the nice holidays. You squeeze the surplus, but make sure you're in surplus. Once you're spending everything you want to spend, but still running a surplus, you've achieved phase 2.
It's difficult to know when to make the transition from stability to lifestyle. The longer you wait in phase 1, the easier the transition will be and the easier it'll be to get to phase 3, but you still want to enjoy life while you're still young enough. In practice, a gradual ramp up of the spending to keep the surplus as high as possible is probably a good plan.
Phase 3: Sufficiency
The ultimate goal, where you're spending what you want and you have enough investment income to cover it. Now you can stop working. You don't need that money any more.
B > D
This isn't easy to achieve and most people never get there. It'll help when the pensions kick in and bills tend to drop off later in life.
Maybe if we work really hard, we can get here before we're old. Retire early and enjoy life. It's a bold ambition and it certainly won't be easy, but it's good to have something to aim for.
We're going to aim high and if we fall short, all the hard work will make sure that we land in a good place.
I made $20 for each 20 minute survey!
ReplyDeleteGuess what? This is exactly what big companies are paying me for. They need to know what their average customer needs and wants. So large companies pay $1,000,000's of dollars each month to the average person. In return, the average person, like myself, fills out surveys and gives them their opinion.