The Zero-Sum Budget Has You Spend All Your Money
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What if you could save money while spending your entire budget each month? Before you dismiss this concept as wildly counterproductive, hear us out. The Zero-Sum Budget keeps you accountable because every penny you make is allocated for a specific purpose. Read the following steps to help get your finances back on track.The first order of business: determine how much money you make each month by figuring out how many paychecks you receive and how much you'll earn post-tax. After you determine your earnings, start planning what you'll spend. Here's the key: don't calculate what you'll spend this month—allocate this month's money for what you'll need next month. List out all of your fixed bills, including rent payments, utility estimates, and groceries. Don't forget to include smaller expenditures such as gym fees or larger bills like student loan payments. Then, it's time to compare and contrast. Once you deduct your bills from your earnings, you can allocate the leftover funds for miscellaneous categories, such as an emergency fund and a long-term savings fund, a vacation fund, and money for fun things such as dining out and going to the movies.
You'll Likely Be Happier If You Choose Time Over Money
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It's a classic debate: Time or money? Money or time? Though the two aren't quite interchangeable, it may seem like you can't have one if you have the other. So, which should you choose? According to research, you should choose time over money if you like being happy. (But wouldn't it be easier if we could all just have both?) In a study published in Social Psychological and Personality Science in May 2016, the majority of the participants favored having more money over more time. However, choosing more time was associated with overall higher levels of happiness and life satisfaction. But, you may be thinking, what if the people who chose time over money already had plenty of money? The research controlled for existing levels of available time and money. While the value of money is easy to quantify, the value of time is a little trickier, which may make it more difficult to value. So, which would you choose? Watch the videos below for more about the relationship between time and money.
The Money You Make Depends On The Sleep You Get
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We know that sleep is good for health, but how important is it for income? To find out, economists Matthew Gibson and Jeffrey Shrader designed a study that compared the wages of one group of people to another group that got an hour less sleep per week, on average. But instead of controlling the participants in giant sleep labs, they took the inspired approach of examining cities on opposite ends of their respective time zones. Amarillo, Texas, for example, is on the western edge of the Central Time Zone, whereas Huntsville, Alabama is on the eastern edge. Even though their clocks read the same time, Amarillo gets about an hour more sunlight than Huntsville does, which means that Amarilloans generally go to bed later. Unfortunately, the business day starts with the clock, not the sunrise, so both cities still rise at roughly the same time. The economists found that this one-hour increase in weekly sleep worked out to a 4.5% long-term increase in wages. The take-home message? You can't always control where on the time zone you live, but you're largely in charge of how much sleep you get, so set a bedtime and stick to it! Learn more about the importance of sleep with the videos below.
Key Facts to Know
In a lifetime, a person will spend 24 years asleep. 0:13
After a few nights of sleep deprivation, the body can fully recover with a few nights of good sleep. 1:04
The ideal average length of sleep is seven to eight hours, but it may vary from person to person. 2:31
Use The Rule Of 72 To Estimate When Your Money Will Double
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Finances can be hard to juggle, especially for those not particularly interested in math. The rule of 72 is an easy tip that anyone with a simple calculator or good division skills can try out. This rule is a shortcut that can be used to quickly—and fairly accurately—estimate the number of years it will take your money to double given any specific annual rate of return. The rule of 72 is as follows: 72 ÷ compound annual interest rate = years required to double investment. The annual interest rate here should be expressed as a whole number; if the rate is 8%, then 72 should be divided by 8, not 0.08. This equation can even be quickly solved in your head, since 72 is divisible by 2, 3, 4, 6, 8, 9, and 12. The rule can also be used to answer the opposite question: how long will it take for my money to halve due to inflation? The rule of 72 is generally pretty accurate for interest rates between 6% and 10%, but can be easily adjusted for rates outside that range. Dig deeper into the rule of 72 (and how to make it work for you) in the video below.
The Sunk Cost Fallacy Keeps You From Cutting Your Losses
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Have you ever bought tickets to a concert, but just didn't feel like going once the date came around? If the money you spent on the tickets led you to suck it up and go anyway, you fell for the sunk-cost fallacy. This fallacy occurs when you make a decision based not on what's best for the future, but on a desire not to waste the time, money, or emotional investment you've already paid. This fallacy can cause all sorts of bad decisions, from individuals finishing books they don't enjoy to governments pouring money into investments with little return (in fact, this is sometimes called the Concorde fallacy after the ill-fated supersonic transport jet funded by France and Britain). This tendency toward irrational decisions has proven itself in psychological studies. In one, subjects were told they bought a $100 ticket for a ski trip, then found a better ski trip elsewhere for $50 and bought that too. When they were told the two trips overlapped and they couldn't get a refund, more than half said they would go on the $100 trip even though the $50 one would be more fun. No matter what you've invested, it's already gone whether or not you continue with your current efforts. Sunk costs can be painful, making it hard to admit when it's time to move on, but it's important to focus on what's better for the future than what you've done in the past. We've collected some awesome videos on this topic. Watch them now to learn more.
from Big Think
Key Facts to Know
The sunk cost fallacy applies when you stay in an unfulfilling career because of how much time you've already put into it. 0:38
The sunk cost fallacy means making a choice based on a desire not to see your past investment go to waste rather than based on the best outcome for your future. 1:15
Sunk costs are painful, so it may take time to admit to yourself that there's no reason to stick to something you've been working on for a long time. 2:21