Tag Archives: Aesop

Investing, Saving, Video Games Reviews, Wealth

How To Collect Dividends Like Pac-Man Collects Power Pellets

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Pacman, Pac-Man, Adventure, Funny, Game

The air is crisp, summer is now in our rear-view.

Like Aesop’s The Ants and the Grasshopper, we must prepare our bank accounts as winter is coming.

When I woke up this morning, it was 44 degrees. Sweater weather indeed my friends. You know what also needs shelter from being left out in the cold, your money! Affluence is your duty.

Affluence Defined

I will define an affluent person as any adult that is saving and investing more than 25% of their income; with more money coming in than going out.

When you have enough income to pay your bills, save, and invest the difference, then you are rich compared to the rest of the world as most are living check to check.

Once you are able to save and invest more than 50% of your income, have more than $2 million in assets and receiving dividend income of $100,000 or more you are fairly wealthy.

When you make more in capital gains than you would from W-2 wage work, then you can kiss the working world goodbye after hitting a goal of $50,000 or more in income.

A salaried adult makes on average $40,000-$50,000 annually. Getting your investment income to this level means, you have created a passive income source large enough to replace a paycheck.

Good for you.

The bigger the gap between income and expenses is the difference between being rich and poor

Recently, I read two books; Evicted and $2.00 a Day: Living on Almost Nothing in America.

The premise is that welfare is dead and families no longer have access to cash assistance.

Those that do eke out a meager existence on modicum amounts of cash, SSI benefits and food stamps.

Within the book it also discusses how landlords were making a mint off the dregs of society, “the poor,” with one making $447,000 a year after expenses meaning he is part of the 1%.

Another landlord had an estimated net worth of $2 million.

The differences in their lifestyles versus their tenants were stark.

The difference between eating everyday or going hungry was just one of many. If this doesn’t scare and motivate you to save more money, then like Poncho’s owner in 101 Dalmations said, “no evil thing will.”

Image result for cruella deville door gif

Evictions are on the rise all across America. Why? The reason is that there is no rent cap.

Rents are going up about as fast as a four-year college degree.

Having more than 50% of your income going out in rent leads to one word: Despair.

You must have cash in the bank.

I know that the price of everything feels like it has shot up overnight.

You are in the red and bleeding out money faster than a corpse does on The Walking Dead. However, you must save. The possibilities of something requiring your immediate cash assistance are endless!

All of the sudden Aunt Edna needs a new roof, the dog needs his shots, the basement flooded (for the third time this year) or junior needs braces.

I once had a Harvard educated orthodontist quote me almost $8,000 for treatment. And that was just for my teeth!

The human body has 206 bones and not any of them are receiving service from this guy. After, watching or hearing more stories of outrageous prices from car loans to purses (a Louis Vuitton handbag could set you back $400 or more), I knew that having liquid savings was the answer.

I’m as serious about saving money as Sarah Connor is about eliminating Terminators!

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Cash. There is no substitute.

I refuse to lock up all my money in investments, but I know better than to just have all my cash sitting around earning no compound interest or dividends.

Pac-Man shows us how to get the job done

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If you have ever played Pac-Man, then you know how the game is played. The player navigates Pac-Man through a maze with no dead ends.

Pac-Man’s favorite snack pellets — the tiny dots he munches as he moves around the video game board — were originally cookies. The “power cookies” are now the larger pellets he uses to eat the ghosts. The maze is filled with Pac-Dots, and includes four roving multi-colored ghosts: Blinky, Pinky, Inky, and Clyde.

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The game was not designed with an ending.

You know what that tells me, that your money too should be looked upon as having no ending. You should save as if you are going to live forever.

I hope that last statements lights the fire you need to start saving this paper.

Using Pac-Man as an example, I want you to imagine the four ghosts are the following: debt, despair, denial and broke.

Your job is to eat as many power pellets “dividends” as you possibly can. The only way to do this is by investing your money.

You may be unsure where to start. I want you to start by opening up a brokerage account with a discount broker such as Vanguard, Fidelity, E-Trade or Charles Schwab.

Just FYI: Interactive Brokers (NASDAQ:IBKR) and Schwab (NYSE:SCHW) got rid of stock trading commissions, creating a major shake-up in the brokerage industry, and competitors TD Ameritrade (NASDAQ:AMTD) and E*Trade (NASDAQ:ETFC) quickly followed suit. Robinhood had already been offering this service, but now the big boys are getting in on the action.

Once you open up your account, you can purchase any 500 index or index fund that owns all shares in Mr. Market. If using Vanguard, that would be the VTSAX.

You put in enough money in Mr. Market and he starts to pay you for showing up in class everyday 365 days a year.

You earn money just for raising your hand and saying present.

How compound interest works

Compound interest is the difference between the cash you contribute to an investment and the actual future value of the investment.

In this case, by contributing just $8,000 per year with the annual contribution being increased by 1% per year (cumulative contributions of $278,779) you are able to accumulate $1,080,688 over 30 years. Compound interest makes up $801,908 of your future balance.

If you start saving $8,000 a year and earn 8% on those earnings, look what happens. You will notice in the beginning you earn only $680 bucks, but by year 30 you are earning $80k a year!

You must chomp away at collecting money to invest it and start collecting dividends.

YearBeginning BalanceSavings @ 1%Interest @ 8%Ending Balance
1$500$8,000$680$9,180
29,1808,0801,38118,641
318,6418,1612,14428,946
428,9468,2422,97540,163
540,1638,3253,87952,367
652,3678,4084,86265,637
765,6378,4925,93080,060
880,0608,5777,09195,728
995,7288,6638,351112,742
10112,7428,7499,719131,211
11131,2118,83711,204151,251
12151,2518,92512,814172,991
13172,9919,01514,560196,566
14196,5669,10516,454222,124
15222,1249,19618,506249,826
16249,8269,28820,729279,842
17279,8429,38123,138312,361
18312,3619,47425,747347,582
19347,5829,56928,572385,724
20385,7249,66531,631427,019
21427,0199,76234,942471,723
23520,1099,95842,405572,472
24572,47210,05746,602629,132
25629,13210,15851,143690,433
26690,43310,25956,055756,748
27756,74810,36261,369828,479
28828,47910,46667,116906,060
29906,06010,57073,330989,961
30989,96110,67680,0511,080,688

Playing for keeps and dividends

Let’s say you start a Roth IRA at 20 and save $6000 annually, thereby maxing it out.

And please if you are going to max out anything, let it be a IRA and not a credit card.

Earning 10% interest, you would have $105,187.

Then you decide to stop investing and let it ride.

After about 23.5 years, you would have over $1M.

After 24 additional years of parking your money on the financial equivalent of Park Place with a hotel, you are sitting pretty on $1,036,063.83.

Investing your money for only 10 years would allow you to stop and not have to worry about your golden years.

Just some food, I mean power pellets, for thought.

Financial Freedom, Financial Independence

Money Lessons I Learned from Aesop’s The Ants & the Grasshopper

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Illustration is by Milo Winter 

Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time. –Johann Wolfgang von Goethe

I remember watching an old cartoon about a grasshopper and an ant when I was a kid. I thought it was very entertaining and learned a very valuable lesson about money and hard work. That the two go hand-in-hand and not to let anyone tell you any different.

Little did I know that the story was originated from an Aesop fable. Aesop was an ancient storyteller from Greece that is responsible for many children’s stories. One of his most famous works is the Tortoise and the Hare.

The story is a classic tale of what can happen if you do not work for a living. Here I share with you my takeaways from the tale.

THERE IS A TIME SET ASIDE CHILDISH THINGS

There’s a time for work and a time for play.

In the story, the grasshopper is very happy in the beginning. It is springtime and the flowers are in bloom. The sun is shining. He wants to sing, dance, play, and be merry.

However, the ants know that, much as they like to always inform us on Game of Thrones, winter is coming.

The ants know that they must shore up their resources before the cold comes or they will be unable to provide food, clothing, and warmth for themselves.

Same rules apply when it comes to life and money. You work to provide your family, a roof over their heads, warm beds to sleep in at night, food on the table, and pay your bills.

When you are a child you spend part of your day at play. A much higher portion of your time is spent in recess and leisure while you learn and grow. However, the older you become, as maturity sets in, then the more you are to put playthings aside. You have responsibilities.

My father always told me growing up: responsibilities first, fun later. I still think of those words even today. Before I even start writing one word for this blog, I clean, pay bills, retrieve messages, return phone calls, open the mail, etc.

I need a clean desk and an open mind free of daily tasks and chores to be able to focus. When I was younger everything was cluttered; my desk, mind, and room. As an adult, I have learned to keep everything neat and tidy. Less hassle that way.

When I am organized I can also pay attention to what I am spending. Make a plan and budget for what I need and want. From this I learned, the more I save, then the more freedom I have as I have the means to provide for myself. Automating savings was the key.

THE MORE YOU SAVE

In one book I read, the father of the author was a hippy that did not care about money in his youth, now that he’s older that’s all he’s worried about.  As you get older, life becomes more expensive. Partly due to health care and others due to inflation. Therefore, you must squirrel away your money chips while you can and fill up the money pot. You do this by working when you are young and able.

Work when you’re young so you don’t have to when your old. Work as hard as you can. This elevates the stress of not knowing later, if you will have enough in abundance, so that working will be at will and by choice instead of because of no other options.

Check out this chart below to see how much you save can change your life.

 

 

 

 

 

 

 

 

 

 

Source: www.mrmoneymustache.com

Mathematically, regardless of income, you save more, then you become financially independent faster and that’s true no matter how much you earn.

EARN YOUR WAY TO FINANCIAL FREEDOM

Did you know, by saving 10 – 20% of your income annually, it would take approximately 30-40 years of working to accumulate enough money to retire? Maybe.

The fact of the matter is that life throws many curve balls at you. Sometimes you see it coming and sometimes you don’t.

The longer it takes to save your money; the more inflation decreases your purchasing power. That’s why you want to save more money faster. This gives your money, more time to earn compound interest and beat inflation.

Did you know, by saving 50% of your income annually, you would earn enough money for one year of retirement? That’s right. That means working for 10 years would equal 10 years’ worth of retirement. The formula is this:  1 x X = years of retirement or 1 (years of work) x X (years saving 50%) = years of retirement

See the chart below and see how much time it will take to save up just one year of retirement.

Source: www.flannelguyroi.com

Basically, if you aim to save, you are buying your freedom. The more you save, the quicker freedom comes.

WHAT YOU CAN DO WHEN YOUR FINANCIALLY INDEPENDENT

Getting back to the ant and the grasshopper story, you learn that once winter does finally come, the ants are safe, warm, and dry, buy the grasshopper is cold and hungry.

The ants worked hard every day. Every ant helped. They all had to work. And they saved up more resources than they actually needed. And when they day came, they were protected.

The grasshopper is left out in the cold with no food or place to stay and freezes outside because he chose to play instead of work.

The ants have mercy on the grasshopper and allow him to come in out of the cold. They decide to be kind and neighborly as it is very important to be a good neighbor. They tell the grasshopper they want him to live, even though he made fun of them while they worked. They feed and warm him by the fire. They tell him he must prepare for winter. They also tell him you must work to live.

The next summer came and this time the grasshopper heeded the ant’s advice and not only did he play, but he also worked.

Therefore, you must learn to work before you play. I learned that if you are unprepared then you are likely to fail. In addition, that being a good neighbor can make all the difference in someone’s life.

Lastly, the biggest takeaway I get from the story is this: money offers protection. So make sure you save a portion of every dollar you earn. I suggest saving $0.45 of every dollar you earn. And since it’s no secret that woman earn less, I suggest $0.50 of every dollar a woman earns should be saved. This would mean you become financially independent within 20 years! Possibly less.

That means, if you start working and saving 50% of your income at age 24, you can walk away from your full-time job at 44.

Sky is the limit from there. You can start doing all the things listed on your bucket list. You can become an artist, photographer, writer, blogger, or tightrope walker. The point is you can do what you want. You can lie on the beach all day if that’s what you want. The thing is, now you get to choose.