Finance Roll

I have just finished reading "Your Money or Your Life" by Joe Dominguez and Vicki Robin. The main idea of the book is to change your way of thinking about money in order to find more fulfillment in your life. Take the example blowing 50 pounds at the casino. After reading the book you should not only think about the 50 pounds you have wasted but also think about the 10-15 hours you have worked to make that 50 pounds in the first place. Time and Money down the drain.

The part of the book I found most inspiring though was the notion of finding your "Crossover Point". The Crossover Point is basically the month when your income from investments (or I assume Passive income streams) is enough to cover your expenses.

By following the rules of the book you will start a wall chart which shows your monthly total income, your monthly outgoings and your monthly investment income. Now as the months progress your monthly outgoings will initially drop (as you become more frugal) and then level out as the number of savings opportunities fall. Your monthly investment income however will continue to increase as compound interest kicks in. By extrapolating the two lines acrss the wall chart, you will eventually reach the stage where the investment income line passes through the expenditure line. That point is the Crossover point and is described in the book as "the pot of gold at the end of the wall chart". This concept of building residual income whilst lowering costs is the mainstay of all good financial titles. The ethos is also echoed in another book I am currently re-reading, "The Four Hour Work Week" by Timothy Ferriss.

Please take a second to work out how far off your Crossover Point is. You may find that it is decades (or even centuries) off. if this is the case then now is the best time to start the two pronged attack. Slash your expenses and start putting 10% into investments, or else your Crossover Point may also coincide with your last breath!