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Making More Than I’m Really Making

This is an old article... But I've often thought about it since reading it initially way back in the day.

Basically it's a comparison of owning your own laundry washing equipment versus a Laundromat.  I initially stumbled upon it when I was doing some research to see if my landlord had been bilking me for the cost of laundry machines.  We had pay washer and dryers on each floor, no in apartment washing units.

Now, I live at this house that I've ended up with and there's a washer and dryer in the laundry room just off the kitchen.

They are definitely in need of being replaced so it's up there on my list.  What am I waiting for?  Well, I'm trying to build up my investments and then let the investments start buying stuff for me.  My next purchase is actually a new phone.  Then I'll do the brickwork, then the appliances.

I'm also helping this all along by doing my stay in more thing.  Which is VERY effective.  I came in under budget last month... my budget of 1000 dollars on the credit card.

My goal is to do that again this month.  I mean, it's not a big deal if I don't come in under or on budget since I make way more than a thousand dollars a month.  But it's just kind of my challenge to see how much I can really clamp down on spending.

So what about this article?

It got me thinking...

You can either make more money, or you can spend less.  But the two are kind of... Similar.

Here's an example.  If you live down the street from your work.  Like I live 2 miles from work.  My cost to commute is very little.

It's 4 miles a day.  That means my gas is very little, my time is very little, and my car maintenance is very little.

If you live 60 miles from your job... That's a crazy commute.  Also, your gas cost increases, your time to commute increases, and your car maintenance and repairs increases.

That's a big one a lot of people don't consider.  That means you need more oil changes and tire rotations.  And eventually a new car more often.

Maybe that adds as much as a couple thousand dollars a year?

So that means that because I live close to my job, and I have a very short commute, I'm effectively spending less money than someone who lives far away.  So, even if two people were being paid the same salary... But one lives 2 miles and the other lives 32 miles... The person who lives 2 miles is making more money in the long run... By spending less money.

What about brewing coffee at home?  Maybe the person who lives close by now has extra time to make coffee at home in the morning.  That's cheaper.  All those morning coffees at your favorite coffee stop spot before work add up.

What about renting versus owning, or laundromat versus having your own washer and dryer.

What about financing a car, or your home, versus paying cash.

Mortgages have origination fees.

Financing cars have additional costs too.

There's interest.

People who need to borrow money end up paying more for everything in the long run.  Especially if they put things on credit and don't pay them off right away.

I actually get cash back on my card, so instead of paying any interest at all, I always get cash back.

Because my car was paid for in full I have no financing fees or interest.

And because there's no mortgage on my house, I'm actually saving any sort of mortgage interest...

All of these things add up!

Work more, or save more.

I could easily argue that all of the things I do to save, could easily add to beyond 10 thousand dollars a year in savings.  That means that someone out there who lives far from their work, has car payments, puts a lot of miles on their car... Either rents, or makes mortgage payments... Puts things on their credit card but doesn't pay it off...

They could easily be making 10 or even 15 grand more a year in salary than I do.

But because of all that, we basically have the same effective salary.

How crazy is that?

As well I have investments that actually pay me each month.  So that means... That for doing very little work other than paying taxes on the income and doing a little research here and there, just because I have a surplus of cash, instead of living paycheck to paycheck...

My bottom line salary increases even more.

No matter what it always pays to own, and to pay in full.  But the thing is most people can't do that.

It's kind of nuts, that our entire system has been built to make it hard to get ahead, and not only that, we make it easier for those who do pay in full, or pay early to get ahead.

Even with owning... For example, I just paid my property taxes.  There are 4 ways to pay.

  1. Pay in full early.  Get a 2 percent discount. (This is me)
  2. Pay on time, pay face value.  This is if you pay at the end of next month.  Maybe some people?
  3. Pay late.  Pay 10 percent above face value.  Maybe more people?
  4. Pay quarterly.  Pay face value, but add an additional fee for paying quarterly payments.  Probably most people?

So, basically... Let's go back to that person who commutes far to work.  Let's say they also bought a house but are having a hard time just keeping up with the mortgage payments.  Now let's say on top of that... They have this tax bill... Actually taxes are usually rolled into mortgages.  I'm going to guess though, that it's not face value.  Or maybe it is face... But there's no way you get that 2 percent pay early discount that I got.

You're thinking... 2 percent... Big deal.  It adds up.  Because it's not just 2 percent for your taxes.  It's 2 percent cash back on my credit card.  It's mortgage origination fees avoided, and car loan fees and interest avoided.

Basically, because I have the means to pay for everything in cash... I get everything cheaper than  someone who doesn't have those means.

This inverts the other way too... Because let's say you don't have debt.  Let's say you zero out and you have no savings but no debt.

Now, as you accumulate money... And turn that into wealth, or a nest egg.  The fees you get charged for someone to manage your money go down as you have more of it.

So, if you have like half a million, you get charged one rate, but if you have 10 million... You get charged LESS.

It's a seriously crazy system.

So, even though I make less of a salary than many of my peers.  I'm actually more on par with a lot of them because I pay so much less in fees and interest.  And I in fact accumulate interest, instead of paying it.

While I do have to spend money maintaining my house, if you do the rent versus own argument...

The average rent for this area to rent a house the size of the one I live in, is about 2500 a month.

1 year of paying that rent, and you move out.  You can't sell.  You just move.  All that money is gone.

Let's say I put even a fraction of that money into this house for maintenance and such.  The day I move, I sell it.

That means, I get value back in my pocket from the work I put into the house.  Plus, generally real estate properties go up in the long run.

Do you rent?  Think about through all the rent checks you've written your landlord.  Add it all up.  And think about that number.

I bet it's a really big number, especially if you've been renting for many years.  Is it enough for a downpayment, or maybe more than a downpayment for a house?  A downpayment plus many mortgage payments?  My guess is, it probably is.

And we're not even going to discuss the security deposits you've lost every time you moved.  Or the pet fees you were charged every month just to have a cute and cuddly pet allowed in the apartment.

So, just be mindful of where all your money is going.  Maybe there's a way to avoid paying some of that money out.  Which effectively is the same as giving yourself a raise.


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