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Monday 29 April 2019

Making More Moola

Money - defies the laws of Physics! 
Regular readers (I am calling you Stealthies from now on) probably know this already, but there is pretty much only one way to generate wealth. It really is as simple as spending less than you earn, investing the difference and then allowing compound interest to do all the hard work for you.

And since it is the investing part is which builds your wealth, the amount you are able to invest each month plays a massive role in generating wealth. The more you can invest the better.

And what determines the amount you are able to invest?

Quite simply, it is the difference between how much you earn, and how much you spend. So effectively there are two levers you can pull to generate wealth:
  • Spend less, or
  • Earn more
Many people focus on the earn more part, because they believe that if they want to solve their money problems, or generate wealth, or become financially free, they need more income. I used to think that too, because on the surface it seems like an obvious solution. Right?

Wrong – that thinking is flawed.

The reason is that earning more money is not going to help anyone with bad financial habits. If you are unable to save anything from your current income, it’s highly unlikely that you will save anything with more income. More money is not going to cause a switch to suddenly flip and allow you to miraculously start saving and investing.

Bad finances are bad finances, no matter how much you earn.

However, if you can get your spending right on your current income first, it means that, should you happen to subsequently increase your income, you will turbo charge your wealth building.

Spending less is also way more efficient than earning more. By spending less you get to keep 100% of what you save. Earning more means you only get to keep what is left after Tax.

And then of course reducing your expenses is a triply (is that a word?) fast way to becoming financially free. Lower expenses mean:
  1. You have more money available to put towards investing. This allows your investment pot to grow faster.
  2. The amount you need to be financially free is less. Because your financial freedom number is based on your expenses (and not your income) the lower your expenses the less you need.
  3. You don't need to draw down as much once you are financially free which means you pay less Tax. This again reduces the amount you need to be financially free.
Spending less means you are aiming for a lower investment amount, made even lower by less Tax, all the while using a larger monthly investment amount.

Winning all round!

So, as you can see, focusing on spending less has many really great benefits. And this is the reason I have written plenty of articles around cutting costs, and not single word around increasing earnings (well up until now at least - there goes that record…)

Who Doesn't Enjoy Some Irony?

Isn't it ironic?
And now for the totally awesome and epic irony...

My ramblings around cost cutting and reducing expenses have actually allowed me to generate some additional income.

Who wudda thought?

Thanks to this blog, I have been down some interesting paths, many of which have resulted in me picking up some additional moola. Very lekker!

Below are some of the ways I have managed to earn some extra money on the side over the last year or so.

1. Speaking Gigs

Towards the end of 2018 I was approached by an HR representative of Top 40 company and asked if I would be willing to do a presentation on financial concepts to their recently appointed graduate employees.

Of course I would!

Such a great initiative by the company trying to equip their new employees with some knowledge before they venture out into the big bad world. If you think about the impact a little financial knowledge can have on a person with a lot of time on their side, it is a no-brainer.

I thoroughly enjoyed the talk, follow up questions and discussions, and would love to do more of this type of thing! In fact this one also ranks very highly on my list of possible avenues I would like to further explore once I am financially free - even if it is not paid, I would love to give back with some presentations and talks at schools for example.

2. Consulting Work

A company which creates personal finance educational content got in touch with me through the blog. They requested a meeting and then offered me some consulting work to assist them with some content creation for their courses.

This has also been highly enjoyable and has really furthered my knowledge and skills in areas which I don’t usually write (or even think) about.

3. Freelance Writing

Through the blog I have managed to do some freelance writing and editing of financial content. This has also been a lot of fun and resulted in me exploring some topics I would not usually look at. I really enjoy writing (102 blog post articles and counting will confirm that), and the fact that I have been able to pick up some extra income while doing it is really great!

4. Website Sale

Stealthies may remember this article on section 12J investments (wow can’t believe it has been over 2 years since that one!) The research I did for the article made me realise there was a bit of gap with regards to consolidated information around Section 12J investments. As a result I launched a website which tried to fill that gap by collating information on all the 12J companies together with some how-tos and other articles.

Then, at the end of last year, a 12J related company approached me and enquired about me selling the domain and website. Since writing the original article, my interest in 12J dwindled as I realised the investment amounts were well above my (and most of the blog's reader’s) pay-grade and not really something the average investor should even consider, and so I was happy to let the website go.

Just to be clear – we not talking mega bucks here, but the offer was good enough to convince me :)

The Best Time To Make More Money

I still maintain my view that cutting costs should always be your first port of call. But, having said that, I am definitely not against trying to earn more money – it’s not like I am going to pass on an annual increase or turn my nose up at additional income streams. More income can certainly fast track your FIRE ambitions.

I think what I am trying to say is that earning more money should only be the focus once your spending has been optimised. That way anything extra that you earn falls straight past your minimised fixed cost base and straight into the bottom line. Apologies, that last sentence sounded quite business like, so let me take off my tie and put it like this – if you already have focused on getting your costs down, any extra earnings will go straight towards your FIRE-pot. This is like adding rocket fuel to your investments.

On the flip side, I want to share something from the whole Bossasa bribery scandal which I found really interesting  - and I bet you didn’t think I would be able to link Angelo Agrizzi with FIRE :)

Mr Agrizzi mentioned that bribes were seldom paid as a lumpsum, but rather as recurring monthly amounts. The reason for this was because then people became dependent on the extra income as their spending rose to fill the additional income, and their new lifestyle could not be sustained without it. This was their way of “locking someone in” and making sure they would continue to play their part.

It just goes to show that if your spending is adhoc with no direction or focus, anything extra that you earn is likely to disappear into a wasteful abyss. Worse still, your lifestyle will more than likely adjust to this new level of spending, and if the extra income falls away you will probably find yourself with a debt shovel, a big hole and wrecked finances.

Focus on the expenses!

Till next time, Stay Stealthy!
 - ~ - ~

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