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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: First CC debt, then what? Date:  3/23/2007  6:14 PM
Author:  OneupOnedown Number:  250508 of 313018


It is really useful to put everything into the same big budget - all taxable and non-taxable income and all benefits and taxes - and all specific dollar estimates for future savings goals.

For example, if I were saving up a down-payment for a house - I would also add an amount to save specifically to furnish said house.

It was especially motivating to consider taxes left on the table; for example in the 25% tax bracket. One could invest conservatively returning only 5% per year for 5 years (while you're learning how to save and invest) and still have a total average return of 10% each year for a full 5 years after putting that money away in the first year! It really helped me to trim my budget elsewhere in order to fully fund a medium-term savings account - so that the next year I could take more of my compensation off the table - and book as an immediate return on investment - the amount I didn't pay in taxes.

I first did this when I was thinking of starting my own business and really wanted to look at what it takes to generate billable hours and specifically I would need to earn to pay for all the employer sponsored benefits. And in addition how much my business would need to grow annually to compensate for risk and to keep pace with income growth through promotions and raises in my regular job.

It made sense for me to continue my traditional career but after looking at things that way I manage all my time and money, including my paycheck from my regular job, as if I were running a business; a monthly budget with quarterly review and semi-annual cost cutting, capital investments, specific performance goals, etc. It was tedious to set up at first - but became really liberating to appreciate where my time and money gave me the most enjoyment and value - which is of course very personal - the proverbial "sleep at night" principle.
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