Wealth=Wise(Investments+Strategies)

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Can you really live on $800 annual budget ? When I first read how a single mother who manage to only spend $800 on her annual budget for a family of 4 : JANE4girls $800 Annual Budget For A Family of 4., I nearly fell off my chair :).

I have always take pride on my budget management skill. I have a simple spread sheet where I keep track of my inventory on my household :

1. Bathroom items
2. Toiletries items
3. Over the counter meds
4. Non perishable food items : canned.
5. Living room items

and the list goes on…

A simple summary of how I manage my inventory :
1. Bathroom Items :
Items Qty In Qty Out Net Qty
Bathroom toilet rolls
Bathroom detergents
Bathroom deodorants
Bathroom scraps
Bathroom drain

2. Toiletries Items
Items Qty In Qty Out Net Qty
Tooth Paste
Tooth Brush
Deodorants
Mouth Wash
Teeth Frost
Bath Soap
Shampoo
Conditioner

and the list goes on. And most of the times, I get a lot of my stuffs from Save-A-Lot store and I believe their prices are very competitive. But, when I read this lady Erin whose groceries bills actually pay for themselves. I was blown away. I thought I get a good deal from Save-A-Lot but this lady get free from Brand name such as Palmolive, I thought well, there must be something about shopping budget mentality that I have not mastered.

So, I shared this with one of my girlfriends on the phone. There is not a whole lot of things that make me excited and making wise investment is one of them. I said let’s imagined these 2 scenarios : Scenario 1 : Mr A who works in a highly stress job , his work involves a lot of traveling, get pay for $55k a year ; and Scenario 2 : Mr B who works in a less stress job, he works in a place that is close to his home.

I have a very simple philosophy about wealth. Acquiring wealth is nothing more than excel in this simple arithmetic equation :
Minimize (Expense) + Maximize (Income).
Expense is Yin (negative) side of the equation and Income is the Yan (positive) side of the equation. A rich man mind set is to continue minimizing the Yin side of the equation and maximizing the Yan side of the equation.

Let us look at these 2 scenarios with very little complicated factors and all variables stay constant :

A. Mr A , an stressful executive with $55k annual income.
He has a stressful job with lots of traveling on the road, has very little time to eat at home and very little time for exercise and personal investment. His stressful job leave him little time to think of about the Yin and Yan of wealth equation investment. Let’s say he spends $10k on his annual budget ( without much thought put into his expense) and $5k on medicines.

Net worth = 55k-15k=40k
He put his money in the bank with 3% interest because he has no time investigating other means of investment.
Next 10 years : Net worth might a little bit over 500k

After 10 years of stressful life and unhealthy eating habits and no exercise, Mr. A most likely like a lot of Americans who has became a statistics on cardiac disease of America: Cardiovascular Disease Statistics.

Estimates for the year 2005 are that 80,700,000 people in the United States have one or more forms of cardiovascular disease (CVD).

* High blood pressure — 73,000,000.
* Coronary heart disease — 16,000,000.
o Myocardial infarction (mi”o-KAR’de-al in-FARK’shun) (acute heart attack) — 8,100,000.
o Angina pectoris (AN’jih-nah or an-JI’nah PEK’tor-is) (chest pain or discomfort caused by reduced blood supply to the heart muscle) — 9,100,000.
* Stroke — 5,800,000.
* Heart Failure — 5,300,000

Or even goes as far as needing some form of cardiac related procedures done , such as : Cardiac Catheterization, Coronary Angiogram, and Percutaneous Coronary Intervention (PCI).

B. Mr B , a less stressful executive with $35k annual income.
His work is close to his home. His work also enables him to have plenty of time home to come home to have home cook meal and plenty of time to exercise and plan on his personal investment.

Expense = 800+200 (doc and some meds)

Mr B always looks out for multiple stream of incomes beside his income from a regular job. Let say Mr B is able to find a multiple stream of income that give him 12% annually.

Net worth = 35-1=34×12%=38k (1st year)
2nd year : 76k
3rd year : 119k
4th year : 168k
5th year : 222k
6th year : 282k
7th year : 350k
8th year : 426k
9th year : 511k
10th year : 607k

Well, Mr B might be in a better situation than Mr A, and might not have to go through the knife of Dr. Cardiac surgeon.

Now, let us look at The Yin and Yan side of wealth equation more closely :

YIN : Expense - Shopping with an investment mindset, let your grocery bill works for you.

We can learn a whole lot from Ms Erin on the expense side : You can read the transcript of the story that was done by ABC13network here.

After I read how she does her budgeting, I realized she has a different mind set of shopping from most people. Most shoppers fell into these categories :
1. They happen to be near a store and they shop as the goods pleases they eyes.
2. They are not as bad as category one, they plan and they shop when they supplies get low because they need to the goods (passive).

Well, have you not seen the light now ? Ms Erin shop does not shop when supply goes low, Erin shops with a very smart strategy :

Plan
1. Have a supply inventory (which I already have).
2. Have an inventory of coupons (which I do not have)
3. Have an inventory of stores sales (which I have not taken notice much prior to this).

Execute the plan
4. Buy items on inventory listed on 1 when 2 and 3 criteria are met.

Have not we all heard about how Warren Buffet invest ? Does that ring a similar bell ?

As much as a frugal shopper , I yet to learn how to make my grocery bill works for me and I hope to start my baby step this year . I might not be able to achieve what Ms Erin has achieved but I like to cut at least /3 of what I spend for this year expense and set a goal to cut 1/2 of what I spend the following year ; and I am sure one day I will be able to manage 1k on my yearly budget on a family of 3.

These are 5 simple steps that I will do on this 1k annual budget journey :

1. Buy Sunday newspaper on coupon inserts.
2. Find out from hotcouponworld site on available coupons that are offered.
3. Get a weekly adv. listings on sales items on most of the stores locally where I live :

• Save-A-Lot
• CVS
• Walgreen
• Publix
• General Dollar Store
• Family Dollar Store
• Food Lion
• Alberston

4. Take notice of buy 1 get 1 free and find out if it is worth the deal.

At the moment, I find angel food ministry provides a very competitive meat price and I will stay with it for a while until I master Ms Erin skill. I calculated the meat price comes up to be around $1/lb. If you are interested in Angel food ministry, you might find my post on $30 Vs $100 weekly grocery food bill worth reading.

These are a few sites that Ms Erin find them useful and they are :

1. Hotcouponworld. This site has an extensive information and the members seem to be very active.
2. A full cup.. I have not check this site out yet.
3. Organic Grocery. I have not check this site out yet.
4. Ebate. This sites look attractive to it, I have just became a member today and yet to find out how useful it is.

I have registered with hotcouponworld and I found the section under coupon resource extremely informative. Ms Erin recommend her readers to read couponing 101 and stockpiling 101 threads on hotcouponworld site. She also recommend to go to manufacturer site such as Pillsbury.com which offers coupons for whole grain pasta.

YAN : Income - Multiple stream incomes where they work for you.
I am sure there are a lot of personal finance bloggers who have been doing it and you will probably learn a whole lot from them.
One that I like very much is of course living on dividends.

This post is submitted to the 156th edition of Carnival of Personal Finance which will be scheduled on Mon., Jun. 9, 2008 and will be hosted by Prime Time Money; the 133th edition of Festival of Frugality which will be scheduled on June 10th 2008 and will be hosted by MoneyNing; and 63th edition of Carnival of Money which will be scheduled on 06/10/08 and will be hosted by Bible Money Matters., and 16th edition of Money Hacks Carnival which will be scheduled on Jun 11, 2008 and will be hosted by Daily Money Hack.

Tags: Carnivals //