The Secret to Budgeting Finances for Maximum Returns
What if I told you that if you invest money with me you would get $100 back?
Would you take me up on my offer?
Well, I'm guessing you would first want to know how much you would have to invest. After all, if you invested $1,000 and I only gave you $100 of your investment back, you probably would not be very happy with your return on investment.
Unfortunately, if you're like most people I talk with, you are investing money every day without ever considering what you are giving up in return for what you are getting back. I'm talking about the money you spend for goods and services.
What most people fail to realize, is that when you spend money for a product or service for which the value diminishes with time and use, you are simultaneously giving up two things.
First, you are giving up the number of hours you had to allocate to work in order to earn the after-tax, after-work-related-expense income to make the purchase.
And second, you are giving up the right to earn interest on that money ... for the rest of your life.
Therefore, the secret to budgeting finances in a way that serves to maximize the financial and emotional returns on the money you spend, is to know ahead of time:
- How many work-hours each expenditure will cost you.
- The amount of interest earnings you will forfeit.
Becoming fully aware of those two figures is the only way you can predetermine if what you get from an expenditure is worth what you are giving up in the process.
Otherwise, if what you give up in exchange for what you get is not important to you, then I will gladly give you $100 for every $1,000 you give me.