Building Wealth On $600 Dollars Per Month

by James on March 11, 2014 · 5 comments

Hello Folks,hundred dollar bills

It’s been a while since we reported on our personal finance so I thought it might be good to put up a quick posting about what we’ve been doing to build our wealth over the past couple of months.  In general, we’ve been doing a lot to increase our bottom line. However, this posting focuses more on smaller things that anyone can do to provide a reliable return.

So here is what we’ve been up to in the past few months.

1. Lending money. Putting about $25 dollars per month into Prosper.com. If you haven’t heard of prosper, it is basically an online moneylending platform. It links borrowers and lenders who want to either borrow or lend money. I’ve been able to get the account up to $950 which is better than the $600 where it was late last year.

2. Buying stock. I’ve been buying about $200 bucks worth of stock monthly using loyal3.com. I’ve been acquiring shares in three companies: Disney, Microsoft, and Coca Cola. I like these companies because they all pay dividends, have shown good historical growth, and are in favor by consumers. The brilliant thing about Loyal3 is that you can buy shares for as little as $10 bucks, which is great because I’ve been cash constrained over the past couple of months and can only afford to make small transactions. Other brokerage firms aren’t geared towards small time investors so Loyal3 has been great for us.

3. Paying off our most expensive mortgage debt. The payments on our first and second mortgages are $2,546.61 and $587.34 respectively. We’ve budgeted $3,500 per month to pay these, which leaves $366.05 extra. We recently allocated the extra money towards our second mortgage which is more expensive than the first one (4.25% vs. 7.5%). It is generally good practice to pay off your priciest debt first and it’s great to watch the mortgage get ratcheted down.

4. We’ve also been periodically shaving the fat from our budget. For example, I’m paying something like $180 dollars per month on my cell phone bill. When the contract expires in 5 weeks we’re going to go with a cheaper family plan – $50 bucks a month.

We also called and negotiated a reduction in our cable bill of $60 dollars per month. It’s not a huge savings, but there isn’t any compelling reason to waste money on premium channels we aren’t watching.

We’ve also faced high electricity bills this winter, so we’ve just ordered a programmable thermostat called “the Nest” and hope that this will help shave off our hefty power bill. We’ll keep you posted on how well this works out.

None of this stuff in particular is going to make us rich, but the long term affects – say over 10 years – should have a substantial impact on our bottom line. For example if we keep this up we should have the following:

1. Our $80,000 second mortgage paid off. I used bankrate.com’ mortgage calculator and it looks like if we continue with our second mortgage pay off rate, we should have the thing completely paid off in ten years. This would be over $80,000 in equity.

2. Just under $34,000 in stocks. Also if we keep investing these smaller amounts, after ten years or so we should have $33,076 (assuming 7% return 3% inflation, a 28% tax bracket). That’s not too bad.

3. About $5,000 in loans we’ve made. If we keep investing in prosper.com, and maintain our current rate of investment, the total after 10 years should be $4,990 (also assuming 7% return, 3% inflation and a 28% tax bracket).

So, if we keep this behavior consistently for the next decade we should realize over $119,000, not including the savings on our utility bills. This is enough for a house or 50 acres of land in many parts of the country.  Not bad for investing just $600 per month!

For more on this topic, check out:

Four Ways to Build Wealth

A Saving Plan Can Help You Build Wealth

Wealth Building is a Team Sport

Select Your Associates to Build Wealth



{ 4 comments… read them below or add one }

1 Dee @ Color Me Frugal March 11, 2014 at 9:25 am

Strong work, especially on paying off the mortgage! And awesome job on getting a cheaper cell phone plan soon! We’ve really go to look into doing that soon.

2 Liam G March 11, 2014 at 8:39 pm

I think it’s awesome that you’re getting ahead by investing so little. I know the $600/month probably feels like a ton (I’m saving about the same right now). A lot of the FI/PF blog writers always seem to save X,000′s per month, so it’s refreshing to see more reasonable levels of savings, but still driving to FI.

3 James March 11, 2014 at 9:41 pm

Laim,

Thanks for stopping by and thanks for the comment! We actually invest as much as we possibly can, but I wanted to show that its possible for people to get ahead even by investing smaller amounts of money. Not everyone has a lot of cash to invest and I think its important that folks realize there are opportunities out there for them.

4 James March 11, 2014 at 9:42 pm

Dee – thanks! No need to pay for all the extra service. Its just a drain on your budget and enriches the telecommunications companies at your expense.

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