One of the greatest concerns in my financial life right now is my saving rate. While the average U.S. savings rate is below 1%, my personal rate is only around 7% (higher if you count pre-paying the mortgage). If you believe David Bach’s Automatic Millionaire books, one needs about a 10% savings rate to be well-off and about a 15% rate to be wealthy – so I am missing the mark there.

The reason I don’t save more is simply there’s no more room in my budget. Housing takes up a huge chunk of our budget, and everything left over must account for electricity, oil, maintenance and gas for two cars, phones, internet, TV, and a small slice for entertainment. I feel like we continue to cut where we can, but we’re living pretty narrowly as is.

Maybe I just need to be making more money.

Several months ago Millionaire Mommy Next Door (please note the new address) did a series of “abundant life” visualizations where she imagined how she would acquire that extra money and how she would spend it.

So I’m doing what MMND did: I’m inviting extra money into my life. Today, the amount I’m imagining is $10,000 a year extra, or a gross income for myself of $55,000.

The Power of Creative Visualization

Wikipedia defines “Creative Visualization” as “seeking to affect the outer world via changing one’s thoughts.” Lest this seems like nonsense to many of you, let me assure you I’m a hardcore empiricist myself. I have been personally involved in visualization experiments where there was a significant main effect of visualization on final performance.

But don’t take my word for it – one of the best-known studies of creative visualization involved Russian athletes (as mentioned in the Wikipedia article above). Over four conditions, those athletes who spent 25% of their training time doing creative visualization outperformed all other groups, including the 100% physical training group.

On a similar note, I’m reading T. Harv Eker’s Secrets of the Millionaire Mind. Eker makes the point that millionaires think differently than us lower class schlubs about money. This changes how we act around money, which affects how much of it comes into our life.

Why Only $10,000?

“If visualization is so great,” you might say, “why limit yourself to $10,000 extra? Why not visualize yourself as a millionaire?” After all, Mr. Eker says that the non-wealthy tend to think in terms of “thousands rather than millions.”

There’s a simple reason: it’s a big step to visualize yourself as a millionaire if you’re just managing to pay the bills and stash aside a little each month. Just ask those people who have become instant millionaires via the lottery: within a few years, most are back to their previous standard of living, no wealthier and no happier. (This Google Answers thread links to some relevant studies). If one doesn’t know what to do with a million dollars, there’s no use inviting it into your life.

$10,000 extra dollars… that, I know what to do with.

Brainstorm Ways to Bring More Money Into Your Life

Here’s my list:

  • My company is being acquired by a larger company, which may mean higher pay and better benefits. Being more proactive rather than reactive at work may go far in this situation, though it’s hard to quantify how far.
  • If all else fails on the J-O-B front, there’s always changing jobs to software/web development. That’s about the entry level pay for such a job, if not more.
  • Hang my shingle out for the various “side hustles” (that’s a popular word in the blogosphere right now) I can perform. Some of these include:
    • Web design. I will need to finally put together my web portfolio to get this going!
    • Tutoring. I can tutor French and statistics. An ad on Craigslist and sign in my library would be cost-free ways to advertise.
    • Teaching. I can submit a proposal to teach non-credit courses in web design and/or blogging at my local community college.
    • Housesitting/petsitting. I think after housesitting for the head of the Objectivist Society and getting locked in his bathroom in the middle of the night in my pajamas, I can handle anything.
    • I can work harder to monetize this blog, or I can work on other topics I would feel more comfortable monetizing. I’ve considered, for example, starting a costuming blog, and using my expertise there to sell fabric through affiliate sites. Something like Kyle’s Learn Spanish On Your Own might be valuable as well, using French, the other language I speak.
    • I can sell stuff I don’t need or want anymore (Kung Fu DVDs, I’m looking at you)

Obviously I don’t want to do all these at once – the hunter that hunts two animals catches only one, to use a PETA-unfriendly metaphor. The idea is that the path to $10,000 is wide open.

Now, What Would You Do With This Money?

This visualization is not complete without a vision of how the extra money will be spent.

An income of $55,000/year would boil down to $2,115 every two weeks (I’m using my current pay schedule for simplicity’s sake). Adding this income won’t move me up a tax bracket, so I’ll be paying the same tax rate.

We’re in the 25% bracket, but according to my paycheck, I only withhold 22% in tax (Matt must make the rest up on his withholding). 22% of $2,115 is $465, so my “take home pay” will be $1,652 – approximately $307 more than my current take-home pay.

Now, if I add some of that extra money to my 401k I’ll be changing my taxable income, but let’s simplify this and assume all that extra money comes after tax.

  • I’ll contribute $130 extra ($225 total) to my emergency fund until I have at least six months of mortgage expenses saved up.
  • I’ll contribute $140 extra ($196 total) to my retirement fund
  • I’ll contribute $37 to my “fun” fund, to be saved for things like my yearly vacation with my mom.
A Simple Visualization

In addition to the techniques above, I’m imagining myself counting out a pile of 10 $100 bills – $1,000. Then I’m imagining 10 piles just like that.

How about you: what amount of money are you comfortable inviting into your life? How would you get it? What would you do with it?

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