Hello SPIers, today we look into paying/investing in yourself. By this, I dont mean some lame self-improvement Tony Robbins thing to learn new skills so you can get a promotion/better job. If you need to pay someone to motivate you, to invest in yourself, you'll soon learn that the reason you are not motivated is because you're lazy and listening to some guy (that you are making rich) will not help.
What do I mean by paying yourself?
Most of us will have normal jobs and most will know that when we get that paycheck, we've already paid the government as a tax, we've paid insurance and whatever comes out of our pay before we get it.
Hey hey, thats my money, I should have 1 dib and what's left for me? Enough to pay rent/mortgage, food, petrol (gas), more insurance for all the stuff we have to by law have insurance for like cars/motorbikes, getting a mortgage etc, mobile (cell) bills and a plethora of other things that auto come out of your bank balance each month. What is left for me? and how do I pay myself anything?
By the end of the week/month, there is not much left for most of us.
If we assume the average person works 8 hours a day, 5 days a week for 40 years, the average person would work around 83,500 hours in their lifetime. If we say you earn $20 per hour and your pay increases by 2% per year for 40 years, your first paycheck gross will be $800 and your last will be $1779. This gives a median gross weekly pay of $1289. Over 40 years you'll earn $2,691,444.40. Thats a big number but remember we've factored in a pay increase of 2% per year which I think is modest. If you swap jobs every 3-4 years, you can normally increase your pay by 20+% easily just based on the fact that new staff get the best rates of pay.
You get $2.7 million pre-tax for selling your 83,500 hours over 10,438 days over 40 years.
How many of those hours do you keep for yourself?
Why not pay yourself 1st. It's your money, you earned it and you should pay yourself 1st. Pay yourself the 1st hour of every day you work and automate it. We always get by with what we have so if you remove this 1st hour of every day we work, it'll not be the end of the world and you'll just spend less on crap you dont need.
You can automate it to be removed from your bank account on the same day as you get paid. most reputable investment platforms will have a feature where you can set up auto payments weekly/monthly for whatever amount you want. You make the amount equal to 5 hours and change it every time your hourly rate increases every 1-2 years.
How many hours could you save over 40 years?
Well, 10,438 if you work that many days. Based on the median weekly wage of $1289, the hour median would be $32.23 which would be $161.15 per 5-day workweek. So we multiply that by the days we worked and get a grand total of $336,416.74. I guess if are factoring in pay inflation over 40 years, we should factor in earning an APY assuming you're investing the money your saving.
If you invest in the SP500 which earns an average of 8% per year and start by saving $100 per week (5 hours for 5 days @$20) and increase by 2% per year and let compound for 4 decades, you'd have a grand grand total of $1,880,426 which is much better than the crappy $330,000 you get from holding it in some crappy 0.03% savings account.
If your labour over 40 years is worth $2.7 million and you can effectively retain $1.88 million of that, 70% of it. You win the game of life and your retirement will be super awesome. Of course, $1.88 million in 40 years will be like maybe $500k at best in today's spending power. Everyone will be a millionaire in 40 years.
What do you think of all that?
Pay yourself 1 hour per day you work and keep 70% of all the money you'll ever earn (after 40 years) Most people will work more than 40 years, so 50+ years of they start at 16-18 and alot of us will work overtime/extra days as well if required.
I hope you found that interesting. Im sure most of you are thinking, cool post but im over 30 already and this is not relevant to me, haha.
Have a great day and let me know what you think of this concept.
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|---|---|---|
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