saving with passion

Here’s my latest column, which ran in the March 28, 2007, edition of the Greenhorn Valley View:

One problem with saving money is – it’s no fun! Most of us would prefer a root canal to putting off the purchase of a new magazine subscription. In most peoples’ minds, saving = not spending. Any money that I save right now is money that I can’t spend right now. Furthermore, any discussions of saving money usually focus on ways to make sacrifices now, in order to fund some nebulous long-term goal, like retiring in 30 years. That kind of talk is depressing! How can we make saving fun? How can we make the act of putting away money something we’d rather do than subscribe to that new magazine?

One idea is to do just that – make saving fun. Is your goal to eventually have enough money to quit work and live off the interest? That’s a good goal, but it’s pretty lofty and isn’t going to help you with the magazine dilemma. But what if you could have your magazine and not have to pay for it out of your paycheck? What if you had enough money in a “magazine fund” that you could use the interest it earns to pay for your magazine subscriptions every year? That way you’d be done paying for magazines for the rest of your life!

But wait a second, how much money is that going to take? There is a simple rule that will give us the answer. The rule of 25 says that whatever your annual expense is, multiply it buy 25 to get the amount that will fully fund that expense forever. For example, if you spend $40 a year on magazines, you could put away $1000 ($40 x 25) , and the interest from that would pay for your magazines for life (assuming a real return of 4%). $1000. That’s not so bad. You could come up with that kind of money in a few months.

And once you had your magazines taken care of, you could move on to the next spending category. Before you realized what was happening, you’d have so many spending categories permanently funded that your need for current income would go down. Now think of the possibilities. Retire early! Do volunteer work! Do work that you’re passionate about, even though the current income isn’t as much as you formerly would have needed.

These are the kinds of things we need to spend more time thinking about. If you’ve been inspired to make saving fun, I’d love to hear your story.

Many thanks to Rob Bennett for his ideas on saving with passion. Read more of Rob’s ideas on www.passionsaving.com

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