Let's Find $500
Paycheck Independence Day is a book about how to manage your money so you no longer need a paycheck to pay your bills.
Every time I do a television interview or a radio interview, I always get asked the same question. "Can somebody living paycheck-to-paycheck stop needing a paycheck to pay their bills?"
I created the Paycheck Independence Day money management system starting in 2004. Before I started, I was living paycheck-to-paycheck, deep in debt and going nowhere. If there were a "Living Paycheck-to-Paycheck Club", I would have been the president.
Today, my wife and I have nine bills that we pay that do not come out of our paychecks. So, yes, someone living paycheck-to-paycheck can definitely stop needing a paycheck to pay their bills if they start managing their money the Paycheck Independence way.
In Paycheck Independence Day, I show how some bills will be paid by investment income. There are examples for someone who can invest $500 per month, $1000 per month or $2000 per month. Many people living paycheck-to-paycheck claim that they do not have $500 per month to invest. I disagree. So, let's find $500.
The first rule for finding $500 is this: NOBODY should have to give up EVERYTHING to find $500. I would not do it and neither should you. Let's keep life worth living.
But, we all know that occasionally we spend money that we should not spend. I think we can find $500 just by cutting back a little.
The two biggest culprits for wasted money are expensive coffees and fast food meals. Here is an example of someone who stops by the coffee shop every day before work and who eats lunch out at a fast food restaurant every day. I am assuming he spends $5 at the coffee shop and $8 for lunch. That's typical where I live in the San Francisco Bay Area. Let's add in a couple of dinners, Pizza night, or whatever.
In the example above, you can see that this person is spending $105 per week on expensive coffees, fast food, and a couple of dinners not cooked at home. Now, let's look at the new amounts with a little cutting back.
In this example, the person has designated one weekday where he does not spend any money on eating out. That's Wednesday. On Monday and Thursday, he goes to the coffee shop but brings his lunch to work. On Tuesday and Friday, he drinks coffee at home but eats lunch out. He is still having Pizza night on Saturday.
With a little cutting back, he still gets to go out to eat five days a week but now he is only spending $46 per week. That's a savings of $59 per week. The cost of drinking coffee at home is negligible. I drink instant coffee at a price of about four cents per cup. For the three days he brings his lunch, we'll assume he brings a sandwich and some side order at a cost of about $2 per lunch. For Wednesday night, we will assume $3 for dinner - maybe leftovers from the night before. With the additional cost of bringing lunch and having one more dinner at home, he is now saving $50 per week or $200 every four weeks (just about a month).
This is just a small sample of how to find money. How many other things can you cut back on? Look at the list below and, in your mind, add some of your own to the list.
- Fast Food
- Expensive Coffees
- Restaurant Meals
- Cigarettes and Tobacco Products
- Movie Rentals
- Movies at the Theater
- Clothes you never wear
- Toys your kids never play with
- Gym memberships that you never use
Remember, we are not talking about giving up everything, just cutting back (with the exception of Cigarettes and Tobacco products.) Every smoker knows they should quit and has set a time in the future when they will quit but, of course, that time never comes. Maybe now is the time to step up and do something about it.
For the next source of $500, go get your credit card statements for the last year. (You do have them, don't you?) Each month, look at what you charged that you should not have bought or that you regret buying. Write down the amount of each charge and add it to the money you could have had to invest.
Do you have a car payment? If so, when will your car be paid off? You can add the amount of your car payment into the money you can invest starting the month after it's paid off.
These are just a few simple ways that everyone can find $500 per month. If you would like to figure out your own numbers, go to the Tools page and click on the Find Money link.
Finding money is just a small part of the Paycheck Independence Day money management system. The book will show you how to determine which bills get paid with investment income and which don't.
You don't have to save up all of the money and then start eliminating paying bills from your paycheck. You eliminate them one-by-one so you can start right away. My first bill was the Trash Pickup bill. It took me four months to eliminate that one. Next up was the Water bill. It took me eight months to stop paying that from my paycheck. Paycheck Independence Day will show you the correct sequence to stop paying bills with your paycheck.
I hope you decide to start managing your money the Paycheck Independence way. I have financial freedom because of it. It was a life-changing event for me. It can be one for you, too.
-- Thomas P. Rood