When we decided that we were going to start investing more in 2013, I didn't know where we would find the money in our budget. My personality embraces risk… as long as all our other savings goals are met and our bills are paid. So, because I wanted to have fun investing (and not lose sleep at night), I knew I could not cut our retirement contributions or our savings deposits. What I hoped was that I would find “invisible” money in our budget; money that we spent mindlessly that would now have an investing job.
Our spending record showed me the money
I have recorded our spending for brief periods of time, especially when money was very tight, but I had never done it for a year. I knew it was a good thing to do, but it's a pain. In 2012, however, I created a spreadsheet and faithfully entered every dollar that we made or were given. I tallied every purchase made by check, debit or credit card and most of the ones made with cash.
I'll spare you most of the gory details, but we weren't as smart with our money as we thought we were. Granted, there were things out of our control: Our septic system needed to be replaced, and we had some unexpected medical bills. Most things, though, were in our control, including the ridiculous $36.75 I spent at the vending machine. Even though that's not a lot of money, it's more than I thought I spent on Wild Cherry Pepsi.
The numbers didn't lie. When I said, “We don't eat out much,” it said, Oh yeah? Well, why don't you take a look at this little category called “food”? Trim a little from this category and you might trim a lot from your waistline AND have leftovers to invest.
Every minute staring at that spreadsheet was worth it. Just by spending consciously, I can afford to invest $50 each month. I do have some invisible money. So that's my first tip to you. Keep a record of all the money coming in and all the money going out.
I still have a landline. Actually, while I'm confessing, I may as well tell you that I still have a rotary phone with something called a cord. It doubles as entertainment for the kids who visit. Can anyone tell me why I am still paying for a phone I don't answer? Yeah, I don't know either. Canceling that service leaves me $30 a month to invest. And that's my second tip. Stop spending money on something that isn't necessary or isn't important to you.
When I tried to find extra money to invest, I didn't want to tap my income from my two side gigs, my husband's side gigs, or either one of our day jobs. We may be able to use those income sources in the future, but 2013 is bringing big changes to our family income and expenses. I'm waiting to see what happens there before we make any investing decisions with that money.
Because that income was safe from this new investing venture, I focused on other income. It was easy to find because, as I said, I kept track of every dime that came into our house. Our random bits of income included things like:
- monetary gifts (my Grandparents give us money as our Christmas present)
- cash back credit card rewards
- cash back rewards from Ebates
- mileage reimbursement from work
- rebate checks
- proceeds from selling stuff
- a bonus for opening a new ING checking account
- interest on our savings accounts
I never considered the significance of this source of income, because I assumed it was so small.
And each check or deposit was small. But when I added them up at the end of the year, the sum felt greater than its parts. The $10 rebate check, the $45 from Ebates and all the other little checks added up to over $1,200. If you dedicate the tiny income streams in your budget to investing, you'll probably find more money than you expected, too.
Using money we already have
Our accounts, both our savings and our mortgage, were the last place I looked. Did I have extra money sitting somewhere, money that was not fulfilling a purpose?
Each month, I round up and pay an extra $82 on our mortgage. Given our low interest rate and that we're ahead on our payments, I could make our minimum payment and invest the $82 instead. I'm still thinking about that.
As you know, my dislike of car loans inspires a $300 monthly contribution to our replacement car savings account. Many of you supported financing a car, because the rates are low and it frees up cash. Stopping that contribution would free up another $300 a month to invest. I'm not ready for this, either. Not yet.
But I am ready to invest money from another account. I opened a Sharebuilder account almost three years ago when I did a little bit of mindless investing which didn't work out so well. I still wanted to invest, but – unsure how to do it – I set up an automatic $25 contribution to the account. And the money sat there. By now, the account balance is $800. Nothing huge, but it illustrates the effects of small change + time = more money than you imagined. And that's my last tip. Even if you can't save/invest as much as you think you should, still do something.
By trimming our budget, practicing conscious spending and keeping track of the little bits of income, I can access $205 a month for investing. I could increase that because it doesn't even include the $82 extra mortgage payment per month. Or the $800 currently in the Sharebuilder account. Or our regular income and side jobs. At the minimum, it's about $175 more than I expected.
Even though it is more than I expected, the amount is – no question – small. I am limited with my investment options.
But this exercise had indirect benefits, too. I used to practice conscious spending, but after we paid off our non-mortgage debt, I got a little lazy. Now I have a focus. I could spend this money on x. Or I could invest it. I may find, depending on how this goes, that I have even more to invest.
What do you do with random bits of income? How do you find money to invest?
Lisa Aberle is a college professor by day and a freelance writer by night. Always an aspiring writer with an interest in money, she once ironically misspelled “mortgage” during a spelling bee. Most of her current adventures take place on the four-acre mini-farm she shares with her husband in the rural Midwest (where she writes with gel pens whenever possible).