Tuesday , 3 December 2024

Life Can Be a “Beach”! Here’s How to Make It So

How to Get Rich… Easily! You see headlines like that all over the place and they’re allsalary spending wealth savings bullsh*t…[Real] life is nothing like that…This article is [personal financial advice] for those who haven’t yet been led down the rosy path of consumer driven expectations. If you disagree [with what I have to say] you’re just disagreeing with math and you may as well disagree with soil. It is what it is and the only thing stopping you from getting secure and then wealthy is will-power.

The comments above and below are excerpts from an article by Chris MacIntosh (capitalistexploits.at) which may have been enhanced – edited ([ ]) and abridged (…) – by  munKNEE.com (Your Key to Making Money!)  to provide you with a faster & easier read.  Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner.)

An Introduction

Is net worth the amount of accumulated wealth you own? Nope, not really, that’s a terrible metric. Net worth should really be calculated as a number of years, not a dollar number. I call it “the beach ratio”. Net worth is the number of years you can sit on the beach doing “sweet FA”. When that number exceeds the number of years you’re likely to keep breathing you’re into the territory where you need to be and you’ll have surpassed secure and become rich.

Your goal should be to ensure you don’t end up like this:

Americans Don't Have Enough Savings For Emergency

or this…

Families Have No Retirement Savings

The above data comes from this this study done by the Economic Policy Institute.

A couple of things to consider:

  • The average American couple (that’s two working people!!) has $5,000 saved for retirement.
  • Nearly 40% of the population has $480 saved.
  • How many of that same 40% own a new smartphone? Just sayin’…so we don’t want to end up there, OK?

Let’s get started…

[Below] is a 4 point summary for younger guys and gals, someone coming out of college or high school.

1. Set Yourself a Base FIXED Expense Ratio

Let’s get practical: Let’s say you come out of college or high school and you’re earning $50k/year. For goodness sake don’t spend more than 10% of your income on accommodation.

…I know I’m going to get a ton of emails saying…”oh, but you don’t understand Chris, where I live you can’t get a decent apartment for 3x that!” [but] YOU have to decide if you’re prepared to sell your future upfront for comfort now or not. When you’re in your 20s you can (and should) flat-share with others to ensure that you don’t castrate yourself financially before you’ve even tried to procreate.

I know of people spending 30% or more of their income on rent and doing it well into their 30s, 40s, and even 50s and, that, my friends, is catastrophic to wealth creation and is like dumping a bag of cement on your back and trying to swim the English Channel. Good luck, you’re cementing your path to poverty. Real poverty…[because] there is a coming pension crisis and there ain’t nobody to bail you out but you.

The task is to fix your expenses as low as you possibly can and then work your tail off on expanding the right hand side of the ledger. As a rule of thumb your expenses should never exceed 70% of your net income, though 50% is really the number. [Such an approach]…means no $7 tequila shots to be had from the gyrating crotch of an intoxicated beauty and no lattes to follow the morning after to cure a hangover…[because] you won’t have the time.

[Instead] all your time should be focused on generating income streams. If you don’t like the concept then by all means join the rest of the crowd and welcome a life of mediocrity. Nobody will fault you for it because it’s what everyone does. This is your choice. It’s black and white.

You’re 20, you have high energy levels, don’t need much sleep, have high risk tolerance, and now is the time you actually should be taking risks. Create the habit, do what is necessary and do it early. If you’re working as hard as you should be at this age you wont have the time or energy to be spending any money anyway.

2. Increase Revenue

Let’s say that in year one your base salary was $50,000, you spent 70% on expenses ($35,000) and therefore by default saved $15,000.

For the purposes of this article let’s work on a 3% annual pay increase. You’ll be gaining experience, increasing your skill set and this is reasonable. It can easily be higher but let’s be conservative.

Your base expenses remain and your net worth has gone from $15,000 in year one to $31,500 in year two ($15,000 x 2 years + 3% on $50,000).

Realise that in year two you’ve increased your net worth generated for that year by 10% and you’ve more than doubled your net worth because you’ve got your expenses fixed.

My readers are a sharp bunch so you’ll understand quite quickly that if you get more than 3% pay increase it all drops to the bottom line.

3. Take Risk

As mentioned in point 1 above you should be taking risks. What sort of risks?

  • Risk your time on things that will educate you to be able to execute better.
  • Develop skills that you can monetise – be on a constant lookout for opportunities to try your hand at building business incomes. By the time you’ve been at your job for 3 years, if you’ve not got at least one side business operating outside of your job you’re doing it wrong.

4. Add Additional Revenue Streams and Buy “Long Dated Options”

Your income is going to be rising because you’ll be working your little tail off in your job, and additional gigs which bring income. Focus on things which increase your skill sets: Pumping gas won’t do that, waiting tables won’t do that. Instead, pick industries that are evolving where opportunities will open up – if only due to fewer entrants knowing they exist. Robotics, programming, anything that can’t be automated away because automated away it will be. It’s only a matter of time…

[I recommend that you] buy long dated options. What do I mean by this? [Below is a] current example:

My daughter loves horses. Every little girl wants a pony, right? The thing is I can’t see how learning how to break in, and train a horse will ever be done by a robot. As our world becomes increasingly automated and the robots take ever increasing tasks it makes sense to me that as humans we’ll gravitate towards, and place increasing value on certain non-mechanical and natural things in our world, and so mucking out horse stables and paddocks, and learning horsemanship skills (not rich Daddy riding lessons for little princess, oh no,) can come in handy in the future. You can’t start early enough.

What You’ll Get

When you internalise what I’ve just said, and really get it, you’ll see a marked change in your net worth in just 2 short years and you’ll realise that every single dollar you SPEND is arsenic to your net worth (beach years).

Stick with it and you’ll get income acceleration as you have increased not just income but most importantly net worth. This is pretty much guaranteed if you stick to it. By the time you’re clocking in at 30 years on this ball of dirt you’ll be richer than most highly paid investment bankers (trust me on this) based on how many years you can survive (remember: the beach ratio).

Remember, it doesn’t matter if you’re earning $100,000 a year or $1 million a year. What matters is how much you’re spending relative to your income which provides you with your “beach ratio”. Your living standard can increase but NOT at the expense of your “beach ratio”. Preferably this is always accelerating, meaning you can outlive your money at which point a rise in your living standard won’t affect your security.

If you disagree you’re just disagreeing with math and you may as well disagree with soil. It is what it is and the only thing stopping you from getting secure and then wealthy is will-power. Exercise it early and exercise it hard.

Share this with anyone you think needs to hear it. It is my sincere hope that at least one of you reading this will contact me in 10 years time with the subject line, “F**k yeah, I did it!”

– Chris

“Too many people spend money they earned, to buy things they don’t want, to impress people that they don’t like.” ― Will Rogers

Follow the munKNEE – Your Key to Making Money!

  1. “Like” this article on Facebook
  2. Have your say on Twitter
  3. Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)
  4.  Share your thoughts with us in the comments section below. We’d like to hear from you!

Related Articles from the munKNEE.com Vault:

1.   Young? Here’s How To Manage Your Money

Here are a few thoughts on managing money as a young person with multiple decades ahead of you to invest:

2. Saving For Retirement Today Will Compound Your Returns Tomorrow

When should you start saving for retirement? Financial advisors say it is never too early to drop a chunk of your monthly paycheck into a retirement account – and ideally in your 20s when you start earning a steady paycheck. The compounding effect of money can be very powerful especially over a long period.

3. So You Want To Join The Millionaires’ Club?

So you want to be rich? In order to join the millionaires’ club – and not get booted out because you went broke spending all your money – you’ve got to develop money smarts. The rich don’t stay rich by spending frivolously and being obsessed with beating the Joneses’. Here are some money management essentials you may want to keep in mind to master like the millionaires do.

4. Don’t Obsess About “Keeping Up With the Joneses” – Outsmart Them Instead! Here’s How!

If you are hoping to live a happier, fulfilled life without money stress, you may not want to obsess with the Joneses. You can outsmart them by making better choices. HERE are several ways you can likely beat the Joneses and improve your financial health.

5. Why You Might Not Be Getting Rich & What To Do About It

Consider how much money you could have in 10 to 40 years if you stopped wasteful spending now and invested that money instead.

6. How Do You Measure Up Against These 15 ‘Successful People Traits’?

The world’s most successful people have one thing in common: they think differently from everyone else” and below are 15 traits associated with such successful people.

7. Become Rich! Here’s How

While some lack the necessary resources to become rich, many have the ability, but simply do not purchase assets that have the potential to appreciate in order to eventually make them rich. Instead, money is often spent as soon as it is earned for immediate need or gratification. This article outlines how to earn and acquire assets like the rich and spend like the poor.

8. Are You a Millionaire? 10 Reasons You May Not Be and What to do About It

The reason you are not a millionaire (or even on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money but the truth is that, for most people, it does not matter how much money you make… [but, rather,] the way you treat money in your daily life. [Let me explain.] Words: 866

9. More Reasons You May Not be a Millionaire – Yet

Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life. The list of reasons you may not be rich doesn’t end at 10. [Here are 10 more.] Words: 842

10. Do You Have What It Takes to Become Filthy Rich?

Saving money isn’t all about whether or not you know how to score screaming bargains. It has more to do with your attitude toward money. Many millionaires, in fact, have frugal ways and understanding how personal traits can influence your finances is an essential ingredient for building wealth. Do you have the 10 key traits to become rich let alone very, very rich? Words: 815