Investing 100 Percent of My Income: May Edition

investing 100 percent of my incomeTime for the next edition of Investing 100 Percent of My Income, and I have just one question:

How is it June already?!

For those of you who are new readers: Will and I are a couple who have pledged to live on one income and invest the other. He gets a steady paycheck, while my income fluctuates because I’m self-employed. So we’ve decided that in 2012, we’ll live on his income and invest 100 percent of mine. (This makes financial planning a heckuva lot easier!)

By the end of last month’s update, I maxed out my Roth IRA, renovated a rental house with a 14.8 percent cap rate, and paid quarterly taxes.

That was the easy part. Those were no-brainer moves.

Now comes the hard part. It’s time to make strategic decisions about how to invest the rest of my income for the next 7 months of the year. Here are a few lessons I’ve gathered:

#1: Spending Money is a Full-Time Job

Spending money requires hundreds of hours. I have to brainstorm ideas. Research options. Gather quotes. Run spreadsheets. It makes me wonder: How does anyone have the time to earn AND spend?

This website’s maxim says you can afford anything, but not everything. If I want to grow this website, I can redesign the site OR hire assistants OR start podcasting.

Alternately, I can focus on real estate. I can save up to pay cash for another rental house OR hire a bookkeeper OR upgrade my triplex building.

Every dollar I spend on X is one less dollar I can spend on Y, so I need to compare the options. Emotion says, “I want it all!” Reality says, “Make a spreadsheet.”

#2: Avoid Too Many Irons in the Fire

Last week I reconnected with a friend from college whom I haven’t seen in years. I described my various projects: building websites, buying real estate, running a freelance business.

“Sounds like you have too many irons in the fire, none of them are getting hot fast enough, and you’re sweating,” she replied.

Wow. She hit the nail on the head.

Diversification is a central investing tenet for good reasons. It’s prudent, up to a degree.

But it also carries the risk that you’ll throw money at an investment you don’t understand. You can’t be an expert at everything.

That’s why I mostly avoid buying individual stocks: I don’t have time to read balance sheets and trade journals. I buy a few broad-market index funds and move on with my day.

The same thing needs to happen the rest of my investments. There are a zillion possible directions I could take. I can’t pursue them all. I need to narrow my options, make a decision, and roll with it.

So What Did I Do Last Month?

Last month, I did a lot of thinking, a lot of reading, and a lot of tinkering with spreadsheets. I spent time with several potential contractors in both the real estate and website world. I started a few negotiations.

And I didn’t spend a penny.

“You mean you’re just sitting on one month’s pay?”

Yep.

I know, I know: this doesn’t make for riveting reading. You’re probably yawning as we speak.

But I assure you, there’s a ton of activity in my tiny little brain. Lots of thoughts being processed. Options considered. Numbers crunched.

Stay tuned.



Thanks to ShedBoy for today’s photo.

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12 Responses to “Investing 100 Percent of My Income: May Edition”

  1. Dave @ 6400 Personal Finance
    04. Jun, 2012 at 1:52 pm #

    Sometimes the best move is no move. You are clearly laying the groundwork for maximizing your returns once you do go ahead and invest the money, no harm in that at all.

    • AffordAnything.org
      06. Jun, 2012 at 1:23 pm #

      @Dave — Thanks! Figuring out what to do is a little daunting, but I’d rather take measured steps than rush into something without adequate thought.

  2. krantcents
    04. Jun, 2012 at 2:35 pm #

    Are you thinking of buying another house?

    • AffordAnything.org
      06. Jun, 2012 at 1:25 pm #

      @krantcents – My goal is to own at least 5 rentals. I have 3 already, but I think it’ll take some time before I can get enough for the next two. I’m sorta considering saving $30K — $50K in cash, so I can buy the next two in cash. Maybe. We’ll see.

  3. Lance@MoneyLife&More
    04. Jun, 2012 at 9:11 pm #

    If you aren’t going to invest it might as well save it. If you just blew it on random things you wouldn’t get ahead and be able to take on bigger investments.

  4. Little House
    05. Jun, 2012 at 9:59 am #

    I like this strategy. I’ll have to see if I can make it work for me and Mr. LH. My income is fairly stable but his fluctuates. If I could get our bills down a bit (moving would to a less costly area would help!) I bet this would work great for us.

    • AffordAnything.org
      06. Jun, 2012 at 1:22 pm #

      @Little House — It’s a great (and super-easy) way to budget. Financial planning with a fluctuating income is tough; if every dollar of that fluctuating income is “bonus money,” then your regular daily spending becomes a lot easier to manage.

  5. PK
    06. Jun, 2012 at 11:05 am #

    I’m with krantcents – another house? Your last project was good looking and tasteful. Anything like that on the market now?

    • AffordAnything.org
      06. Jun, 2012 at 1:21 pm #

      @PK – Thanks for the compliment on the last project! My goal is to buy 5 rental houses. Three down, two to go! I think it’ll take some time before I can get the funding for the next one, though.

  6. Marcos T. Rodrigues
    10. Jun, 2012 at 8:32 pm #

    I think it’s hard if you have many projects, many things to consider, I suggest focus on one project which you think might as well boost your goal.

  7. Angelica @ skiingblog
    15. Jun, 2012 at 2:00 am #

    This project is really useful..I might consider a lot of things..

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  1. I Spent $17,021 In the Past Three Months – Investing Report for August | Afford Anything - 05. Nov, 2013

    […] triple the amount that I originally predicted! Yikes! Good thing I’d been stockpiling cash for months leading up to this project. […]

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