Compound interest earns you more money than simple interest. With simple interest, you earn interest only on the principal. With compound interest you reinvest the interest, i.e. each cycle your new principal is larger, and so over time you earn more interest.
This may not be news, but it’s the topic of this post because recently I observed someone make a calculation error. Here’s an example for a principle of $1000, rate of 3%, and time of 15 years.
Simple interest case: $1000 x (1 + 0.03 x 15) = $1450
Compound interest case: $1000 x (1.03)^15 = $1560
Recently I made a purchase of items over which I hesitated. They cost more than I planned to spend, but were very lovely. Here’s why I chose not to scrimp, but to splurge.
The items were a good fit. They filled the niche I planned to use them for, in more than one way. They would be long-lasting.
The items were also well designed and made of good materials. Some or all of the work (design, production) was done locally rather than outsourced to sweat shops. And the items were sold by a wonderful local business.
It’s the second set of points that probably contributed to the higher cost of the items. However, those points were congruent with values I support. So, putting my money where my mouth is, I made the purchase.
Hmmmmmm… I sat down to write this blog post at my usual schedule. Ideas popped in, but none flowed into writing. I willingly spent a few hours procrastinating. I reminded myself, as any writer knows, that you just have to do it.
Today’s blog message is simply this: to create money to live, you just have to create money to live. Do you know how to earn more money? Do you know how to save more money? Do you know how you can improve the quality of (the value you experience from) your money? Go create money to live!
Assuming an already-established garden spot, i.e. neglecting start-up infrastructure, growing your own fruit and vegetables can be extremely cost effective.
Arugula / rocket lettuce: Half a dozen healthy plants in the garden provided my salads every day or every second day. Cost of seedlings: ~$4. Cost of arugula: $8/month. Savings: $4 in the first month, then $8/month.
Kale: I’ve just planted kale and estimate at least the above savings.
Kumquats: A mature tree in citrus season produces a lot of fruit! Cost of a small tree: ~$10. Cost of a jar of marmalade or relish: ~$5. Savings over three jars/year for five years: ~$65.
Herbs: A variety of herbs can be used for garnishes, flavour, sauces… Cost of four varieties of herb seedlings: ~$15. Cost of one store-bought fresh herb per month over a year: ~$30. Savings: ~$15.
Sweet potato: When a sweet potato in the kitchen started sprouting, I sliced off the sprouting piece and nurtured it. Cost of starter slip: free. Cost of half a dozen sweet potatoes: >$5. Savings: >$5.
Gardening can be yummy, fresh and cheap!
Recently I had an unfortunate (though not uncommon) issue with my (Macbook Pro) computer power adaptor: near the power adaptor “brick,” where the cable emerges and is flexible, the cable frayed. No power adaptor meant no power. I needed a solution, and finally chose to fix it.
New power adaptor: ~$90.
Temporary or bodge-it suggestions: home-made splint ($ effectively free); epoxy putty (~$9); or glue gun (~$12).
Fix*: (scalpel away the plastic cable for a closer look), cut the frayed cable away, strip the wires, solder, heatshrink ($ effectively free if you already have the required tools and supplies).
I was pleased that I minimised use of resources/waste, learnt about the innards of my computer cable, and saved ~$90.
When was the last time you fixed something?
[*Disclaimer: voids warranty; may be risky; you are responsible for your own choices, actions and consequences.]
Retail: Chocolate truffles cost approximately $1-$2 per piece, sometimes more (especially if gift-boxed).
Homemade: Yesterday I made over 40 truffles for approximately $8 in ingredients, i.e. $0.20 per piece. It took me an hour of hands-on time. The results were delicious!
I like truffles but rarely buy them because of their cost. However, I was happy to make them at 10-20% the retail price. Is there anything you would enjoy making at home that would also save you money?
We’ve all heard the advice not to impulse buy. But here’s an example of how seizing an unplanned opportunity — combined with patience and knowing where I stood financially — worked out nicely.
My wishlist included an item that was a non-trivial expense. I knew that I would eventually purchase this item for a hobby, however a) it was not a priority, and b) it didn’t fit my current spending pattern.
On the weekend I passed by a sale. I decided to stay open-minded. The sales assistant recommended me a product and size, and the first one I tried was excellent: much better than I expected, and I felt it was unlikely that I could find a better fit even if I were to shop around.
When I walked into the store, I already knew that I had planned to not buy this item immediately. The pressure to impulse buy was removed.
I also knew that, although it wasn’t within my current budget, I could make it happen if I really wanted it. If I bought the item now, I would benefit from a 40% sales discount and no future rental costs. I would also save time shopping around.
So, after patiently wishlisting this item for a year, I impulse bought it…and saved time and money in the long-term 🙂
Shortly before Christmas I listed an item on an online sales board. I priced it reasonably, albeit near the top of the market range because I thought that this amount more accurately reflected its value (I don’t believe in ultra-disposable consumerism).
Most of the responses I received were for offers less than half the asking price. I was unwilling to sell at those prices, so I declined those offers and waited.
On Christmas Eve one person, J, asked: What was the lowest price with which I would be happy? I thought this was a great, fair question because she would get a lower price than listed and I would still be happy. I answered honestly; J accepted my price gladly and with appreciation.
However J could only pick it up on Christmas Day. This was a risk for us both: a) if this stranger didn’t show up, then I would lose a chance to sell before Christmas and would then be in a saturated market; b) if I didn’t honour my word, then J would not have a Christmas present to give. Yet I agreed to hold it for her.
Later that day, I received another offer. Although it was again too low, this person was willing to pick it up on the same day. Although I explained that I was holding the item for someone else for Christmas, this second person tried many times to convince me to change my mind. I could have had cash in hand with no risk to myself.
I waited. I chose to honour my agreement; and I trusted that J was equally honorable.
The result: J got the Christmas present she wanted at a price she was happy with. I received an amount that I was happy with. We were both thrilled with the positive interaction. We both wanted, successfully negotiated, and behaved according to our values to have more money to live.
[You might also be interested in Money To Live’s post on the Costs associated with working full time.]
Recently a friend asked me: how do you manage to travel more and work less?
Over a cup of tea, we agreed that work could be a stressor. When we responded to work demands by feeling stressed, we both tended to spend more money either to relax or save time. My friend relaxed by going out; she spent her money on drinks, clubbing and taxis. I spent more money on eating out and going to cafes. With more money coming in, we worried less about spending the extra cash…even though the little things added up over time.
When I am relaxed or not working, my lifestyle is different. I entertain myself (and others) in different ways: I spend more time at home, I cook more. I spend less, I save more. Rather than working more to spend more in ways that I don’t actually prefer, currently I am choosing to relax, spend money more consciously and formally work less.
What if your food could be delicious, fresh, locally grown…and inexpensive? I enjoy these features by shopping at farmers’ markets. It’s not only my pocketbook that benefits: local farmers make more money too. We both have more money to live.
Organic apples at half price! Sold as juicing apples, these were the same type of apples as their regularly priced counterpart; they were just not “perfect” aesthetically, so you would never see them in the supermarket. I snapped up 4 kg of those delicious apples.
“These are a delicate mix of sweet and tart, they’re turning with the season this week”. Yup, it was another cheap bag of apples, freshly picked just a few days ago and with unofficial tasting notes. Sometimes the lovely stall owners tuck some extra produce into my bag as a gift.
“One dollar! One dollar bag! Six for four dollars!” At the end of the market weekend, fruit and vegetables from my local growers’ market is particularly cheap. The same food that sold for normal prices during the day is sold for $1 per bag, for multiple bags it’s often cheaper. It’s a great way to pick up a lot of inexpensive produce (and particularly great if you’re cooking large veggie soups or preserving fruit). The food is fresher and cheaper than the supermarkets even at non-sale times.
Where’s your nearest farmers’ market? 🙂