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Freelance Finance

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By Rob Jupille
Prizes, investments and inheritances aside, there are only two basic ways to increase your personal wealth: spend less or earn more. Ironically, spending less may be your most immediate route to having “more” – more affluence and more confidence.
Will earning more make things easier? Earning more money might alleviate your current financial pressures, but it also might bring new ones. More money gives you more psychological license to “live it up.” As MSN Money columnist M.P. Dunleavey wrote, instead of the reduced debt and increased savings you might logically assume would happen after a jump in income, what usually happens is that “you end up spending a little more on living and not so much on your goals.” In the earn-more school of thought, your career is your most important asset, more crucial than any investment.
How about spending less and paying yourself first? There’s an old saying: “A dollar saved is worth more than a dollar earned.” There’s real truth to it, because a dollar saved is really more like two dollars earned.
Here’s why: Let’s say you get a $5,000 raise. After you deduct income taxes, Social Security taxes and 401(k) contributions out of that gross, you are really left with $2,500-3,000 more disposable income. Economically, a $2,500-3,000 personal savings is worth as much as a $5,000 raise. Also making more money at work usually involves spending more time at work. Who wants to do that? You could work overtime or work weekends to make an extra $5,000, but how much time does it take to save money?
Many Americans pay lenders first, but why not pay yourself first through direct deposit of a portion of your income into savings accounts or investment accounts? Particularly for freelancers, whose income can vary widely, setting aside savings, even if you just toss the day’s spare change into a jar, can give you hundreds of dollars to invest each year.
Another trick: If you want to buy something, just wait 24 hours. The urge may very well pass, and you might just save the money you would have spent.
The simplest step toward prosperity? Spending less and saving more will certainly put you above the norm. On average, Americans spend more than $1.20 for every $1 they earn, according to statistics from the U.S. Department of Commerce’s Bureau of Economic Analysis. Our personal savings rate is at its lowest level since the Great Depression.
If you want to start to make financial progress, talk with a qualified financial professional about the ways you can save and invest and stay out of the red and in the black.
Rob Jupille is president of RTJ Financial Management, a fee-only financial planning firm in Santa Monica. Send your financial questions to [email protected] or call his office at (310) 587-3370.

Written by Rob Jupille

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