• Spend less than you make

and

• Make more than you spend

That is it. Every single way that you can get ahead financially will fit into one of those two categories. Nothing mind-blowing by itself. What I want to do however, is to challenge you to look at life from the second point of view.

Rather than competing to see how little you can spend, put your energy into maximizing how much money you can bring in. The difference is truly night and day. Lets look at how.

Let us assume there are two categories of people to match the two ways of looking at financial wealth building. One group, the Frugals, spends their time working to minimize what they spend. The other group, the Grinders, spends their extra time trying to increase their income.

Now, since finances over the long term vary dramatically with small changes, we have to make some assumptions. In setting this up, care was taken to choose assumptions that even out between both options. So, no massive raises for the Grinders, and no excessive investment returns on savings for the Frugals.

Assumptions

Frugals

• $50,000 initial salary
• Raises match inflation perfectly
• 40% savings rate
• 4% return on savings after inflation

Grinders

• $50,000 initial salary
• Raises match inflation plus 2.5%
• 20% savings rate initially
• 50% of raises are saved
• 4% return on savings after inflation

Results

• Frugals have more savings for the first 32 years
• Grinders finish with 10% more savings, but set aside 36% more over the years
• Grinders standard of living increases every year

Frugals start off much stronger. Their savings ethic lets them build up to a very nice retirement portfolio with constant progress in the right direction. At the end of their efforts, their lifestyle requires just 1.3% of their savings for retirement. This means they can increase their standard of living in retirement and still live off less than the income from their savings. Or, the Frugals can retire early while maintaining their standard of living.

Grinders raise their savings and their lifestyle every year. Eventually, they are able to reach and overtake the Frugals. However, the income required from savings to maintain their lifestyle is 3.8%. This is much closer to the maximum 4% withdrawal rate recommended. This means that Grinders are more sensitive to recessions and run a higher risk of outliving their money.

Still, even the Grinders do very well for themselves with an excellent change of a long and happy retirement. The best part is that they do not have to dent themselves to get there. So, given the choice, I’d rather be a Grinder myself.

Fortunately, nothing prevents us from learning from both.

Frugals

Grinders

Look around your home.  You can probably see a dozen things right now that you no longer (never did) need, but somebody else will pay money to get.  That is all you need to get started. Later, after you have sold a few things and are familiar with the site and the selling process, you can start buying things specifically to resell through eBay.

Here is a quick guide to getting started, some links to other resources to help, and a list of suggestions to help you get the most for your efforts.

First Steps

1. Buy Something.  This is important.  Not only does it let you get to experience how eBay works, but it also starts you towards getting some feedback.  Don’t forget to follow through promptly and leave feedback for the seller.
2. Build Positive Feedback.  So much of the eBay experience is built on trust – and is measured by your feedback rating. Since many sellers do not want to do business with people who have zero feedback, how many buyers do you expect to get if you have zero feedback too?  Build up your feedback, and you will become trusted, more buyers will bid on your auctions, and you will make more money.
3. Learn the written and unwritten rules.  Like any community, eBay has a number of unwritten rules. Most are common sense, some become clear later.  For example, the buyer is expected to leave their feedback first, then the seller is an unwritten rule.  Important written rules include what you are (and more important are not) allowed to list for sale.

Sell Something

Once you have bought some items, earned positive feedback (it is 100% positive, right?) and gotten comfortable with how to use the site, now is the time to look into selling your first item.  Here are some tips to help.

1. Choose the right category.  Listing your item for sale under the right category is critical, since people will not bid if they do not find your item.  Putting it under the right category will make it as easy as possible for people to find your item.
2. Write a Descriptive Title.  Use the full available title length to describe your item.  Yes, it will be better detailed in the description, but you have to get people to click into your auction for them to see the description.  The title is the best way to do that.  The more information in the title, the better people can tell if it interests them.
3. Include a picture.  Yes, adding a ‘Gallery‘ photo costs an extra 35 cents.  Listing with photos get more traffic and bids.  Depending on what you are selling, having a gallery photo can increase your sales price significantly, and in some cases be the difference between a sale and no sale.
4. Be Honest.  eBay buyers are not adverse to asking for a refund or adjustment after the sale if what they got does not exactly match the description. Worst case – especially when starting out – is they can be unhappy enough to leave you negative feedback.  If an item is used – even once – do not describe the item as new. Multiple photos can help here, especially if there is noticeable wear or damage on what you are selling.  At the same time, do not skimp on the good points of the item – you are selling it after all.  Just don’t hide the negatives.
5. Answer Questions.  Keep an eye out for questions from buyers and answer them promptly.  Usually, people will not bid until their question is answered, and due to how the auction format works, you want people bidding as early as possible so the price can be driven up.  On a side note, do not be alarmed if you get few or no bids until the last day or last hours of an auction.  Sniping (last second bids) is a tradition on eBay and few people put in their high bid early.
6. Accept Paypal.  It is important to accept Paypal payments (I think all new sellers must now agree to do so when signing up).  Many buyers will not even bid on an auction that will not accept Paypal.  This limits your pool of buyers.  Feel free to accept checks and money orders too, but be careful of scams.  Checks and money orders can be forged or bounced easily.  My suggestion though, is to accept them, but be up front that items paid for via check and money order will wait until they have cleared at the bank.
7. After the sale, be prompt and thorough.  When you have your payment, ship the item, packaged well.  Send it out promptly too and let the buyer know when it has shipped (include the tracking number if there is one).  When they leave you positive feedback, be prompt about leaving it for them too.

Successfully selling your first few items is this simple.  If you choose to expand and run an eBay business – even part time – you will quickly find that manually listing your items each time is a slow, laborious process that does not scale well.  Do not fear, there are tricks of the trade to help out.

Turn eBay into a Business

There are tens of thousands of people who make a good income off of eBay.  Few are getting rich off it, but many are doing it full time and doing well.  Many others are happy augmenting their day jobs.  It depends on what items they can get to resell, what quantities, and how organized they are.  You can do it too, but you have to be organized about it.  Here are some suggestions that I have seen to be useful.

1. Get organized.  This one is critical.  If you are doing an eBay business, you are generally dealing in quantity and not high prices.  Even if you are only selling 10 items a day, with delays in payments and buyer questions you could have as many as 100 different sold items at once in various stages from sold, paid, shipped, delivered, feedback received and feedback left.  This does not count any auctions you have that are still open and not sold.  Organization is critical.
2. Get Turbolister.  Turbolister is an eBay tool that you can download off their site to help you create and manage your auctions.  It allows you to duplicate auctions, copy and edit them, change the format, relist auctions, and more. It is one of the more useful tools available, and it is free.
3. Expand.  To earn a few dollars, it is simply enough to list items when you can get them and process the sales regularly.  To turn it into a business, it is important to ensure that there are always plenty of items available to meet the income needs of the business.  At this point, volume is the key.  The best way to achieve volume is to have a variety of related items available.  If you are a crafter, this is not difficult as the variety of items you can make with a single set of craft skills is pretty large.  If you are a reseller, it means that you need to focus on a range of items that are available to you at a cost with sufficient margin for profits.

Good luck with eBay, whether it is for fun and a little bit of cash or if it is for a living and your regular income.

The fourth group would be the blogs that do a good job of advocating a balance between all three categories.

One that I recently came across adds another layer.  Without downplaying the importance of reducing debt, limiting expenses, and investing the savings, On Moneymaking wants us to make more money.  Jon figures that if we can make more money for ourselves, that it will help us reach our goals much faster.

I really enjoy his writing and ideas.  Already, I am working on using some of those ideas in my own life in an effort to increase my earning ability and to help me reach more of my goals quicker.

After you subscribe to his blog, take a look at his About Jon page.  It may surprise you, but the determination and optimism are attributes I can admire.  I wish him success.

Living beneath your means is not always easy. Yet, for most of us, we look at people who make just a little bit more than us and wonder where their problem is. The extra $5,000 or $10,000 a year would make all the difference for us. How often though, do we look past our bulging budgets and look at how people making that $5,000 or $10,000 less than us do it?

For a challenge, I want to look at what is possible at the current minimum wage rate. To make the example possible, lets assume a single individual, in good health, with no dependents who works 40 hours a week with no days off or vacations. How will he fare?

There are a lot of variables to be considered. I am going to look at a best case scenario. Many things are possible that would make this less doable than we would like. To help make that clear, here is a list of the assumptions I am making for the sake of the example.

Assumptions

• Transportation costs are zero. Either work and shopping are close enough to walk to, or our worker owns a bicycle and gets around under his own power, regardless of the weather or time of year.
• Affordable housing is within range of this low paying job.
• The only income our worker has is from his job.
• Our worker is focused and keeps strictly to his budget.
• There are no outstanding debts or credit card usage, so the common pitfall of interest expense is avoided

Minimum Wage Calculations

Well, according to the IRS withholding calculator, our worker will owe $343 in taxes for the year ($6.60 per week. Furthermore, Social Security and Medicare taxes will take an additional $930.85 for the year ($17.90 per week).

Minimum Wage Weekly Pay

So, our hero has a grand total of $209.50 a week to live on. Hmm. This example is going to be a hard one. I’m not sure this is going to end well. Let us continue forward and see what the damage really is. Notes on individual expense items are after the table.

Minimal Budget

This worked out well. It looks like it is theoretically possible to live like that. Here’s my comments on each of these categories.

• Rent – There is a grand total of 1 apartment complex in the area that I have found offering rent this low. There may be others, but they do not advertise very well. The offering at this price is a quad arrangement with 4 private bedrooms and the rest of the facilities shared. Anybody else see a potential concern? Avoiding this setup will take all of the money in the Other category.
• Utilities – Careful control of utility bills can result in a total this low. It would be minimum phone service, very little water, gas, and electric usage and being thankful that trash is handled by the landlord.
• Food – This is one category where there is not much that can be done. There is only so much that can be done to get 35 meals a week out of $40.38. Most fresh fruit and vegetables are unaffordable. Organic and light ingredients are even less affordable. Ramen, macaroni and cheese, and other high carbohydrate and calorie dense products will make up the bulk of this food budget.
• Insurance – Many people will look at this an wonder if this expense could be eliminated. Can it? Probably not. If something did happen, is there any way for possessions to be replaced without going into debt (which there is no room for in this budget)? Plus, is there any way to handle getting alternative living arrangements while things got fixed without having insurance?
• Household – A lot of things fit under this category. Everything from soap and shampoo to postage stamps, paper towels and garbage bags. All of the little things that are needed to keep things flowing smoothly around the home.
• Entertainment – While many of us overspend on this category in our own budgets, there is not much entertainment going on here. Early showings at the dollar theater without popcorn or soda, using the public parks, and reading library books will help stretch this category. Even with those things, going out for a coffee or buying the latest DVD is not going to happen very often.
• Charity – Everybody can contribute something to charity. Admittedly, $5.77 is not much. This is another category that some people may recommend being eliminated. While every dollar helps, there is something important about being able to recognize others needs and contribute towards it, even if only in a token manner.
• Clothing – Two choices here for staying clothed and out of jail. Thrift stores and discount stores. Some things you will want to buy at one and not the other, while some clothes may only be available at one or the other. Either way, there will certainly not be a brand name label on much of anything in the closet.
• Other aka Emergency/Misc funds. Not a whole lot of emergencies can be handled with this small amount of money. Having even a little bit of slack in the budget does give some options over having nothing.

Minimum Wage Summary

As we can see, it is a very tight budget for even one person to attempt to live on a single job at minimum wage. It is actually even tighter than I expected it to be. It is doable, but it certainly relies on a lot of assumptions. If housing this cheap is not available, or if transportation costs need to be included, there is suddenly no slack available in this budget.

Some situations will not be able live at this wage without additional support. Having dependents who are not working, being unable to work full time, or incurring an emergency will force this worker into financial crisis. Even missing a single day of work can be enough to cause problems.

Credit, especially with any fees or high interest rates, would be disastrous.

Conclusion

Thankfully, few – if anybody – that sees this article will be in this dire of a situation. For the majority of us that are living well above minimum wage, this exercise can still have some application. If it is possible for somebody to live on that small an amount of money, why do so many of us have trouble living on much more? Is there a rule that I am not aware of that is requiring me to live to the limits of my financial life?

Look at your own financial life. Is there anything you can take away from this academic exercise and apply to your own life? The takeaway I have from this is the need to really sit down and look at my spending closely. That review is to take a close look and really determine what expenses fulfill a true need and which ones fulfill wants. Once I have been honest about that, many more options for how to proceed will become clear.