Thursday, January 17, 2008

Millionaire Mind and Play Money

So I did relisten to the 3rd CD of The Millionaire Mindset which seemed to have the most action items in it. When Eker states his recommended division of your money, including the 10% (of post-tax income) for financial freedom account, and mentions people who don't have that much or even any money left over after necessities, he doesn't actually say to borrow a full 10%, he says borrow something more so you have some money to manage. So I thought about how I might apply this to my own life. Currently my income fluctuates and there are months where the bills surpass the income. I do already have 5% of pre-tax money going into a 401K account, because the company I work for matches that 5% contribution. (basically for giving up about 3% of post-tax income, I end up with 10% in a retirement account). But, I don't use any of that to invest in passive income earning ventures except that the account does earn interest. So... this doesn't seem it meets the spirit of the recommendation.

Eker also recommends that you set aside 10% of post-tax income into a play account, feeling that you need to derive enjoyment from your money as motivation and that no one is going to continue without splurging on some extras from time to time. To try and do so sets you up for a yo-yo spending pattern, just like a strict diet can set you up for binge eating. After much consideration I decide to set aside $150 a month for my 'play account' and 'financial freedom' accounts. I think the most important aspect is that the two numbers should be balanced. And my play account is basically anything that is a non-essential -- the haircut (hey, I could still see), the few clothes (again, I was not naked) and the eating out expenses. To manage this, I plan to simply choose an unused credit card and dedicate it to those expenses. Now, the financial freedom account is just a little harder -- after all I'm not supposed to necessarily invest that much into passive income opportunities each month, some of it I could leave in savings (which of course is passive income but a very low yield). Eker recommends setting up a separate account, but that seems to me to complicate my banking. Well I guess that's something to figure out for the drive home. Speaking of which, it's time to go.

Later gator.


Ready Maid said...

Sounds like you're off to a good start this year. Having your company match your 401-K dollars is fabulous, and a no-brainer whether to particpate to the max.

Good luck as you work out the rest of the details.

Diana said...

Thanks and I stopped by your blog which also has some good ideas for making positive changes in your life (and negative changes in your weight, ha ha).