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Saving Money - Made Easy

Kirk McDougall's Rules of Saving Money
Make It Easy

Let the company you work for save money for you.  Many companies have savings programs, bond purchase programs, stock purchase programs, or something similar.  If your company does not have such a program you can try a bank.  Many banks have similar programs.  Just remember that the people in the bank are sales people no matter what they call themselves.  I am not saying that you should not trust the people at the banks but it is good to know that they are sales people and also how they get paid.

It is great to know the 3 Rules of Income but how does that help you unless you can save?  Well... read along and I will show you one thing I have done.

Here is my story.

   Saving money... How boring.  I could never save money, yet I was semi retired at 38, fully retired at 53, and spent over 3 full years vacationing.  So how did I do it?  Well... I made it easy.  I got someone else to do it for me.  The company I was working for had a stock purchase program.  But the stock market is scary.  Well.. it can be... if you are playing the stock market, but we are saving.  Saving is boring.  Remember?

The way the Stock Purchase Plan where I worked was that my company would take money off of my pay before I got to it*  which is the very best time to get money out of me.  Next they would buy shares in the company I worked for and hold on to them for me.  As a bonus the company kicked in some money and bought even more shares for me.  They increased the portion they kicked in each year until it reached 40%.  That is like getting a 40% raise on any money that I put into the program.

I wanted my money NOW to spend on all sorts of things.   Some of which were even important.  So I started with the minimum contribution and that way I did not have to give up much money.  After a few months in the program I noticed that something interesting happened.  I didn't miss the money.  I just went out and spent whatever I got paid while they slowly bought shares in the company for me.

The Stock Purchase Plan rules stated that I could sell my shares for cash anytime after I had owned them for 6 months or more so I waited until 6 months was up and I sold my shares keeping only a small amount so that I did not have to start over.  Now I had a big chunk of money as opposed to the piddly little amount that my company paid me.

Since that worked so well  I increased the amount of money I contributed.  I didn't miss that either so I increased my contribution bit by bit until I was at the maximum.  I continued to take out the money on a semi regular basis to buy larger purchases.

As life likes to do, it got in the way and I kind of forgot about the savings plan.  I did not notice that the company share price had been getting lower and lower.  When I found out that did not make me happy.  Eventually the share price went down to about a quarter of where it had been.  I was sad and did not take any more money out because I thought that I had lost most of it and there was no point.

One day our company was bought out and we all had to sell our shares.  The offer for the company was around the same price as it had been when I first started to buy shares.  Remember how the share price had gone down to a quarter of where it had been?  Well... something magical had happened.  While the share price was so low, the company was able to buy many more shares for me**.  When the company was sold I had so many shares that I was very happy.   I had a lot of unexpected money to spend.

Not everyone will make this much money.  I was fortunate to be working for a company with a volatile share price.  Good things and bad things will happen.  This is an example of one of the good things that happened to me.

One of the first things that I did in the new company was to find out if they had a stock purchase program.  The new company did have a stock purchase plan so guess what I did.  Of course I joined the program and contributed the maximum.  Not only was I still getting my pay I was getting a big chunk of money every 6 months or so.

Make sure to get advice before making any large money decisions and remember free advice is worth what you pay for it.

*-This is known as Pay Yourself First.  No... this does not mean taking your money and spending it like crazy before the creditors get it.  It means letting your company (or whoever is trustworthy) stash your money away and then getting a huge chunk of money in a lump sum.  This will allow you to do a number of things you could not do and just possibly pay some of those creditors... you know... if you want to.

**-This is known as Dollar Cost Averaging.  Warning this explanation may involve numbers and math.  If you are squeamish please use caution.

I contribute $100.00 per month and the company contributes $40.00

Month 1
Share price = $2.00
$140.00 / $2.00 = 70 shares

Month 2 Stock market crash
Share price = $1.00
$140.00 / $1.00 = 140 shares 

Month 3 Stock market bounces back
I cash in
Share price = $2.00
140 + 70 = 210 shares
210 x $2.00 = $420.00

The company took $200.00 from my pay and I received $420.00

Your actual results may vary.

I am happy to chat with you about this or anything else I write.  Just message or email me.


Kirk McDougall Having A Perrier At The Royal Opera Cafe in Paris

Comments

  1. Great advice! Really liked how you explained Dollar Cost Averaging. Thanks!

    ReplyDelete

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