If your income increased 30% for a year

[Tyler Durden]

Assume you are an 'employee' on a salary which enables you to live comfortably. If your salary were to increase 30% for a year (and after that your salary would revert back to the previous level), what would you do to make the most of it (in the financial sense)?

Is it possible to somehow use the extra money to earn additional passive income equal to the 30% increase so that after the year, your income remains the same?

 

[tech/a]

Assume you are an 'employee' on a salary which enables you to live comfortably. If your salary were to increase 30% for a year (and after that your salary would revert back to the previous level), what would you do to make the most of it (in the financial sense)?

Is it possible to somehow use the extra money to earn additional passive income equal to the 30% increase so that after the year, your income remains the same?

Well you need to make $300/$1000 earned less tax of course.
So $15000/$50000.

So for 30% you'll need to have at least your income for a year to invest and retrn 30%
if your going to just use the increase then you'll need to return 100%
if you have twice your income available then you only need make 15%

So increasing your income by that 30% each year going forward your chances of 100% while not impossible could be un likely.but you may well be able to find another MAD.

 

[Tyler Durden]

Well you need to make $300/$1000 earned less tax of course.
So $15000/$50000.

So for 30% you'll need to have at least your income for a year to invest and retrn 30%
if your going to just use the increase then you'll need to return 100%
if you have twice your income available then you only need make 15%

So increasing your income by that 30% each year going forward your chances of 100% while not impossible could be un likely.but you may well be able to find another MAD.

Thanks tech for the maths, I just couldn't get it set out in my head.

And lol MAD, I actually had my eye on that but never pulled the trigger

 

[Smurf1976]

Since the day I started working, I have always saved / invested any "additional" income - overtime, acting in higher roles etc. Anything that increases my pay above the normal base I put 100% of it into investment as I've always maintained a very strict rule of not spending "temporary" income but of investing it instead.

Do that, grab as much additional work as you can get, and you quickly end up with a reasonable capital base to start investing. Reinvest the profits, then it all seems rather simple.

The only difficult part is the "what to invest in" bit...

 

[Julia]

Since the day I started working, I have always saved / invested any "additional" income - overtime, acting in higher roles etc. Anything that increases my pay above the normal base I put 100% of it into investment as I've always maintained a very strict rule of not spending "temporary" income but of investing it instead.

Do that, grab as much additional work as you can get, and you quickly end up with a reasonable capital base to start investing. Reinvest the profits, then it all seems rather simple.

The only difficult part is the "what to invest in" bit...

Is there an ultimate goal, Smurf? i.e. a level of assets where you will feel happy about what you've already accumulated and invested?

I don't mean to be intrusive, but I've noticed in many people (including to some extent myself at times) that the accumulation of money gets to be a habit which can be quite hard to break when one can take it a bit more easy.

In the past you've outlined how you find it pointless to spend money for the sake of it and I agree. But I'm interested in how easy or otherwise it is for any of us to say to ourselves: "OK, you have enough. Start thinking about spending a bit."

 

[Macquack]

I don't mean to be intrusive, but I've noticed in many people (including to some extent myself at times) that the accumulation of money gets to be a habit which can be quite hard to break when one can take it a bit more easy.

Billionaire shopping centre magnate Frank Lowy says "there is no such thing as having enough".

But then again, he is Jewish.

 

[Ves]

Is there an ultimate goal, Smurf? i.e. a level of assets where you will feel happy about what you've already accumulated and invested?

I can answer from my own perspective Julia, if that helps. My 'pie in the sky' goal is financial independence (ie. having capital that generates a sum of income that will cover all of my current living expenses and lifestyle choices). I seek the choice to work on my own terms, rather than work because I need it to survive. Of course this offers time and flexibility to pursue travel interests and further university studies in my interests such as literature and philosophy.

 

[Smurf1976]

My ultimate goal is simply to create a passive income stream. Once that happens, it them becomes my choice whether to work or not...

From a practical perspective, to me it has always seemed unwise to become accustomed to spending "temporary" income which may not continue. Just because there is some circumstance which gives rise to a huge income for a period of time doesn't mean it will continue so the idea of investing that money, in order to create an ongoing income stream, seems logical to me.

Some days I earn my base wage and that's it. Other days I've been known to clock up over $1000 extra in a single day. That's very intermittent income and the odds are it won't continue forever. Make hay while the sun shines is my logic.

As for spending, well I'm not one to waste money but I'll happily spend on anything I deem worthwhile. I'm not willing to spend on an expensive car, my 12 year old one is just fine so far as I'm concerned. Likewise I'm not paying $150 a tonne for firewood (which will probably be green anyway) on the first cold day of Winter when with a bit of preparation you can get bone dry wood for $90 a tonne if bought in Summer.

On the other hand, if there's something I want to go to in another state then I just book flights and a hotel and go to it. I spent $2500 on a trip to Adelaide a month or so ago and I'm about to book a 6 week holiday in the US (never been there before...).

 

[Julia]

I can answer from my own perspective Julia, if that helps. My 'pie in the sky' goal is financial independence (ie. having capital that generates a sum of income that will cover all of my current living expenses and lifestyle choices). I seek the choice to work on my own terms, rather than work because I need it to survive. Of course this offers time and flexibility to pursue travel interests and further university studies in my interests such as literature and philosophy.

Thanks, Ves. That's the sort of response I was hoping to hear and is in line with my own, and what Smurf has outlined.

It's in such contrast to Macquack's quote from Frank Lowy which I can only begin to understand on the basis of Mr Lowy's hardship in his early life in Europe.

It does, in fact, go to the sort of habitual squirrelling of money long after one has more than enough and probably has more to do with a psychological insecurity than any material necessity.

Anyone else with a comment on this?

 

[Tyler Durden]

Thanks, Ves. That's the sort of response I was hoping to hear and is in line with my own, and what Smurf has outlined.

It's in such contrast to Macquack's quote from Frank Lowy which I can only begin to understand on the basis of Mr Lowy's hardship in his early life in Europe.

It does, in fact, go to the sort of habitual squirrelling of money long after one has more than enough and probably has more to do with a psychological insecurity than any material necessity.

Anyone else with a comment on this?

This is probably derailing my own thread but...

It could be a case of "ideals". What I mean is, it's easy for us to say "yeah, when I reach x it will be enough", but when we actually do reach x, we may think "why stop now when I can make more?"

In the movie 21, the main character joins a card counting team and says his goal is to just make enough for his college education. When they succeed and he has made enough to cover his college fees, he continues, because he wants more.

Or it could simply be a case of self control.

 

[Smurf1976]

My attitudes are heavily influenced by having grown up in a situation where household income abruptly, seriously and permanently declined when I was 11 years old. Add in debt at several times the remaining income combined with high interest rates and suffice to say it's not much fun.

I will avoid stating the exact circumstances but suffice to say that this is the point at which I effectively stopped being a child and became and adult. You grow up real fast when there's no choice, and some life experiences you never forget.

I was 16 when the situation bottomed out but I was 18 before there was any real stability (but still on a low income as an apprentice). Hence for practical purposes I may as well have been an adult at age 11 since 7 years of financial stress removes any concept of "childhood" rather effectively.

I do not wish to ever repeat that situation again, hence my desire to create a second income stream for reasons of security.

 

[Julia]

Thanks, Smurf. Your experience supports my instinct that it's the awfulness of being poor, with the resulting sense of insecurity, that is often a driver of that determination to never be there again.

When I left a marriage with no home, no job and no money, and just grateful to be alive, working toward financial security was my total focus for years.

That's reasonable, I guess, but I still find occasionally even now that I'm OK financially, the frugality that is no longer necessary can be a habit hard to break.

Tyler, apologies for derailing your thread, and thank you for your contribution. Hope you don't mind if others might also like to offer their thoughts on this?

 

[Tyler Durden]

Thanks, Smurf. Your experience supports my instinct that it's the awfulness of being poor, with the resulting sense of insecurity, that is often a driver of that determination to never be there again.

When I left a marriage with no home, no job and no money, and just grateful to be alive, working toward financial security was my total focus for years.

That's reasonable, I guess, but I still find occasionally even now that I'm OK financially, the frugality that is no longer necessary can be a habit hard to break.

Tyler, apologies for derailing your thread, and thank you for your contribution. Hope you don't mind if others might also like to offer their thoughts on this?

Not at all, I'm just glad people are participating in my thread :

 

[burglar]

Not at all, I'm just glad people are participating in my thread :

Simple really.
Every single time I had a house repayment in increased income, I put it into my house.
Paid it off real early.

 

[tech/a]

The secret to real wealth isn't accumulation.
of excess funds.

Its the ability to create and generate

PASSIVE INCOME STREAMS

Here you will find REAL and ONGOING
Financial security.

 

[waimate01]

But I'm interested in how easy or otherwise it is for any of us to say to ourselves: "OK, you have enough. Start thinking about spending a bit."

I read a book called "How Much is Enough" by Arun Abey (not to be confused with another book by the same name), and I have to say it was life-changing.

There's way too many books on "how to get ahead", and not enough on what to do when you start to get there. And it's equally important lest you find yourself trapped on the roundabout. If every extra million made us live a year longer, then maybe there'd be some point. But it doesn't, indeed perhaps even the reverse in some cases. Work hard, get ahead, then relax and live a little

 

[craft]

Thanks, Ves. That's the sort of response I was hoping to hear and is in line with my own, and what Smurf has outlined.

It's in such contrast to Macquack's quote from Frank Lowy which I can only begin to understand on the basis of Mr Lowy's hardship in his early life in Europe.

It does, in fact, go to the sort of habitual squirrelling of money long after one has more than enough and probably has more to do with a psychological insecurity than any material necessity.

Anyone else with a comment on this?

I grew up in what you would describe as a financially poor family and lived in a government housing area. I felt emotionally rich compared to lots of the people I grew up with because I had both parents but the both died at reasonable young age leaving nothing financially behind.

I would have sworn to you for many years that all I wanted was financial security.

I have been looking at average weekly earnings for a long time – initially as a target to drag myself up to because I didn’t like being regarded as below average. Once I obtained average weekly earnings I was happy – everything above that was happily saved and invested. I’m comfortable at expending average weekly earnings. I never yearn to spend more. There are no debt repayments so it is actually quite a bit of money. Something’s you have to save for but I quite like that – makes sure you really want it. I find nothing emotionally worse on wasting money on something you get no satisfaction from.

I have financial independence now because I can fund the average weekly wage from Investing and I have financial security because I have accumulated the capital that I can do that for the rest of my life with very low risk.

But I am still driven to take risk to maximise return. So what I would have originally sworn to you – that it was all about financial security can’t be true. It can’t be about spending because spending more (other than on specific things like kids education.) seems to make me uncomfortable.

The best I can figure now, Is that I love what I do, and the money is simply a score card. I have considered resting on the proposition that I want to leave my family some sort of financial legacy because I didn’t have one, but there are limits to that and I am also sure that on reaching those limits I still would not stop.

So analyse that – Is it all about doing what you love and what you are good at or it’s all about prior emotional impacts or maybe I subconsciously yearn to spend more latter? I truthfully don’t know – I just continue because I can’t imagine doing things any differently. It would be like telling myself to not try my best.

Probably underlying stories everywhere, that we don’t know or understand – makes you wonder why so many people are so judgemental about others based on the superficial layer that they see.

 

[Julia]

There's way too many books on "how to get ahead", and not enough on what to do when you start to get there. And it's equally important lest you find yourself trapped on the roundabout. If every extra million made us live a year longer, then maybe there'd be some point. But it doesn't, indeed perhaps even the reverse in some cases. Work hard, get ahead, then relax and live a little

Agree. I wonder, though, if this is always as easy as it sounds.

I'm reminded of having been brought up to have targets, to be the absolute best I could be, to win wherever possible. I don't suppose I consciously recognised it at the time but believe now this placed an unrealistic and unnecessary stress on my growing up years. As an adult I had to consciously work toward accepting that it was OK to just be OK, mediocre even.

So I'm thinking rather that the pursuit of financial security can be about stuff quite apart from the actual money. Not sure.

I grew up in what you would describe as a financially poor family and lived in a government housing area. I felt emotionally rich compared to lots of the people I grew up with because I had both parents but the both died at reasonable young age leaving nothing financially behind.

I would have sworn to you for many years that all I wanted was financial security.

I have been looking at average weekly earnings for a long time – initially as a target to drag myself up to because I didn’t like being regarded as below average. Once I obtained average weekly earnings I was happy – everything above that was happily saved and invested. I’m comfortable at expending average weekly earnings. I never yearn to spend more. There are no debt repayments so it is actually quite a bit of money. Something’s you have to save for but I quite like that – makes sure you really want it. I find nothing emotionally worse on wasting money on something you get no satisfaction from.

Yes, the whole rampant consumerism phenomenon leaves me puzzled.
viz Smurf remarking above that he's quite happy with his less than latest model car.

I have financial independence now because I can fund the average weekly wage from Investing and I have financial security because I have accumulated the capital that I can do that for the rest of my life with very low risk.

But I am still driven to take risk to maximise return. So what I would have originally sworn to you – that it was all about financial security can’t be true. It can’t be about spending because spending more (other than on specific things like kids education.) seems to make me uncomfortable.

OK, so you're describing the same sort of pattern I'm wondering about and which it's hard not to define as an ingrained habitual need. Is that too strong?

The best I can figure now, Is that I love what I do, and the money is simply a score card. I have considered resting on the proposition that I want to leave my family some sort of financial legacy because I didn’t have one, but there are limits to that and I am also sure that on reaching those limits I still would not stop.

So analyse that – Is it all about doing what you love and what you are good at or it’s all about prior emotional impacts or maybe I subconsciously yearn to spend more latter? I truthfully don’t know – I just continue because I can’t imagine doing things any differently. It would be like telling myself to not try my best.

And on a purely practical level, we're all better off keeping our brains active, so you can justify continued efforts to increase wealth on that basis, I guess.

Probably underlying stories everywhere, that we don’t know or understand – makes you wonder why so many people are so judgemental about others based on the superficial layer that they see.

Yes, indeed.
Thank you, Craft, for allowing us such a personal insight. Much appreciated.

 

[McLovin]

The best I can figure now, Is that I love what I do, and the money is simply a score card.

I agree with this. I don't spend that much money, certainly not on material things. I enjoy investing for the intellectual challenge more than anything else. That's not to say the money isn't nice, but then I'm not sure if the money is nice because it's money or because it's proof that my thesis was correct. I guess the question is, would money for nothing (with apologies to Dire Straits) fulfill me? The answer is probably no.

 

[Tyler Durden]

The secret to real wealth isn't accumulation.
of excess funds.

Its the ability to create and generate

PASSIVE INCOME STREAMS

Here you will find REAL and ONGOING
Financial security.

Just wondering how you define 'passive'?