Time 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!)
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.
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?”
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.
Thanks to ShedBoy for today’s photo.