November 8, 2002

Getting Cash to Invest
By Marcel Chartier

Getting cash to invest can be the hardest part of investing. Usually most people make money, pay bills and really hope to have something left over. Then some disaster hits and "poof" goes the little extra. Happened to me all the time. Why? Pretty clear, my expenses where based on my income, not part of my income as it should have been.

You simply cannot get ahead if you spend what you make, the only option is to reduce expenses, or make more. In many cases people decide to make more money and get a second job or start a home business. Some folks can save alot of money by reducing extras - usually the lousier you are at budgeting the more you can find to cut - the upside of being a "lousy budgeter". If you are pretty good at budgeting like me that is a disadvantage - cutting out extras would have me living like an hermit in sackcloth. Well not quite, but darned austere - man, you still have to live.

The trap many of us find ourselves in is that what we have isn't that special, but after all the costs - we are broke. Coming up with a regular stream of investable cash can only be done if you live a couple of notches below your income, make $50,000 a year? Then live at $40,000 or less if you can. Live off the cash you make, not the credit you can get.

Or, get a second job and invest every dime you make. Don't buy a better car, don't buy that big screen TV - invest that second income. After a few years you will be able to buy anything, within reason, that you want because that investment will, based on historical norms, start throwing off some growth and you won't need to invest as much.

It is not easy, I hate the idea. But, if you really want to be the "millionaire next door", or even the couple next door that always seem to be going on vacation and always seem to have enough to have a decent car and the nice furniture ... it may be just worth it. To me, it is worth it to sacrifice now to be better off later because I want the freedom to choose what I want to do.

Getting investable cash is hard, as it does mean a lifestyle change that most of us don't want to do. Darn.