I spend a lot of time helping people figure out how to make money in the stock market. Most people don't truly make money:
- They put their money into mutual funds which pretty much follow the market or perhaps do a bit worse.
- They put their money into big companies that they have heard about and then leave that money in there for a long time. The stock moves up and down but really doesn't increase their wealth.
Or, they follow my advice and find great companies to invest in (see the Watch List to the right) and then have automated indicators tell them when the stock is moving up or moving down. They react accordingly and build up a large equity position.
But how do you find the money to invest in the stock market? It is getting tougher and tougher to make ends meet and many people are living beyond their means. If you are in that boat, I found a great article that you should read: How To Afford Anything. Here are some highlights:
Cheap means buying something obvious crappy, and only stupid people do that since they usually cost themselves more in the long run. For instance, a cheap person hires the wrong person to do a job, and winds up paying more to have a competent person have to fix the damage done by the first workman. Cheap means giving your girlfriend flowers picked out of a funeral home dumpster, and leaving the wrong sympathy card attached to them, That's going to cost you a lot more than you just saved!
Frugality is entirely different. Being frugal means using your money well and not wasting. Being frugal often involves spending large sums on the right things, like hiring competent professionals to do a job, or buying a more durable, quality product that lasts far longer than a regular one.
The people who want to sell you a new car do everything they can to make it easy to take your money. It takes a great deal of self control to resist. Let's face it: everyone deserves a new car every couple of years, and if you can afford it, why not? Simple: because it costs you tens of thousands of dollars that you could spend on more fun, or even on better cars if you do your homework and buy used.
Let's look at fast numbers. The shortest reasonable commute is 10 miles (16 km) each way. (Anything shorter is bad for your car, since it won't heat up all the way and boil off the water that condenses from the exhaust in your cold engine. This water dilutes your oil and rusts your exhaust. Engine wear is far, far greater in the few miles during engine warm up, too.)
10 miles each way is 20 miles a day. There are 250 work days a year, or 5,000 miles a year for commuting. At 50¢ a mile, the latest averages for running a car, that's $2,500 a year.
I'm really cheap. I always order the least expensive thing, and skip beverages and extras. This sounds silly, but if you eat out often, simply skipping these high-profit extras can buy you an expensive camera in a few years.
I eat off the dollar menu at fast food. I don't get suckered into buying a drink or fries. I love the $1 double cheeseburger at McDonalds, but if I ordered a drink or fries, I just padded the bill up to triple what it might have been.
Only buy what you can afford. Don't buy anything until you have the cash to pay for it.
Half of America doesn't get that, and spends all its money barely making the minimum monthly interest payments on their credit cards each month. GAG!
Americans are the only people on the planet who walk into a store and pay the price on the sign.
My wife and I always ask for the deal. I've gotten price concessions even at Sears! I love my wife because she is such a deal-getter. I couldn't afford not to have her, for instance, last week she haggled a mattress store down to half of their bottom-basement posted sales price on a floor sample! She paid about one-third the new sales price of the item. Few Americans have the mettle to haggle as well as she does.
If you save $5 a day by skipping a latte, you'll feel better, make more money, have more fun and save almost $2,000 every year. I don't know how much Starbucks actually charges for each dose, but give it up for a couple of years and you again just paid for a free new exotic camera.
When I bought my own health insurance, I had a plan that was inexpensive, but had a $5,000 annual deductible. If I had a serious problem, I could find $5,000. I saved about $3,600 in annual premium (I paid $300 a month less for this insurance) by not having a small deductible, and always came out ahead. Never ask an insurance company to pay something you could afford to pay for yourself. You pay heavily for that privilege, if they pay out at all.
Ken has more suggestions on his site, so take a look. He is obviously talking about saving up to buy expensive photography gear but the principle still remains the same - just replace the expensive photography gear with great investments.