Thursday, May 29, 2008

Hypothetically, I could be saving lots of money

I say hypothetical because prior to this project I was already living a frugal life style. Let's say however, that instead I have been able to save $200 at the end of this project. If I continued saving at this rate through the span of the year, I would have saved $2400. That is a lot of money! Now if this moolah was invested properly, say in a mutual fund, then after compounding and interest the amount would be even more. After a decade of this practice, I will probably have enough money to put a down payment on my first house! That is pretty awesome considering by that time I will have completely adapted to my "green" lifestyle therefore making it seem like free money to me.

People have told me over and over that with a salary below $50,000 a year it is almost impossible to live in Silicon Valley. I propose a counter argument. Here in Davis I pay about $500 monthly for rent, $600 for food, and lets just say $400 for other expenditures. That totals to about $1500 of monthly expenses. Multiply this sum by 12 and you have $18,000 of annual expenses. If you were to make exactly $50,000 a year, after tax that would be around $40,000 give or take some (I'm too lazy to do the exact math). $40,000-$18,000 = $22,000. Let's also say you're making $400 monthly payments on a car because you weren't as smart as Ari and didn't get a fixed gear. Add other random expenses (times where you broke your self control to be green) that total to $3200. That's another $8,000. $22,000-$8,000=$14,000. So theoretically at the end of the year one should have $14,000 in the bank. I GOT MONEY IN THE BANK! (not yet but soon)

Some might say this will be impossible for them to accomplish but for me, I've grown quite accustomed to a frugal college budget. It is true that with this income I won't be able to support a family, but then again I'm fully expecting my future spouse to be making 6 digits, if not more. And like I said earlier, after years of continuously saving and investing, it will pay off when I can finally afford a home. When that happens the borrowing leverage I'll have will open a whole new world of spending options. Of course since I'm green, I won't be spending anything at all.

Sources: "Personal Financial Planning" (Gitman, 2008)

note to readers: this was completely hypothetical. i have poor self control and most likely by the age of 25 will be on the sidewalk somewhere asking for change. At least if that's the case, I won't have a choice but to be green. Cheers!

No comments: