Who hasn't dreamed of winning the lottery? I don't even play it, and I dream of it from time to time. My coworkers at doc review pool together every week to buy some tickets. The guy who runs it jokingly calls it the company retirement plan. Anyone who wants to play drops in $2, and then someone goes and buys however many tickets that will buy. In all the time I've been working there, they've never gotten more than $5 back in winnings. Since $5 is kind of hard to divide between 17 people, they just rolled it back in and bought some extra tickets the next week.
I'm devoutly Christian, but I don't think there's anything morally wrong with gambling. The reason I don't do it is because I think it's foolish. I call the lottery the tax on people who don't understand math.
Instead, today I'm going to show you the better way to "win the lottery". Meet our friend compound interest.
Let's say you decide you want to play the lottery every week. That's $2 per week, or $104 per year. We can round down to $100 to account for the occasional $5 win.
If you started at age 18 and stopped at age 68, that's 50 years of lottery tickets, or $5000. Not a bad jackpot, but we can do better.
If you put that $2 in a savings account every week at 1% interest, you'll end up with $6751.
The average stock market rate of return is 7%, so if you invest your $2 instead of just stashing it in the bank, you'll end up with $47,800. That's a pretty nice deal.
How many lottery ticket purchasers really only buy just one ticket, though? What would happen if you bought 5 tickets a week? If you took the $10 and invested it in the stock market, you would end up with $239,004 at the end of your 50 years. Congratulations. You just won the lottery.
Sunday, May 14, 2017
Broke Urban Lawyer Returns
Hi everyone! I'm back. I've been working a lot lately, which is a double-edged sword.
I've scaled back at document review - I'm now working 20-25 hours per week because my solo practice is picking up. I'm doing about 15 hearings per month plus all of the case development that goes with that. I feel like I spend so much time on the phone.
And...I have some good news to share! I paid off two credit cards this month, and I'm really close to paying off a third. It's so empowering to see the balances drop each month.
There are two philosophies on debt reduction - the snowball and the avalanche. Each one consists of making the minimum payment on all but the "target account" and then directing everything you can to the target account. The snowball method involves paying off debts from smallest to largest. The avalanche method involves paying off debts from highest interest rate to lowest interest rate. The snowball method has a lot of supporters, but I do the avalanche method because it's so blindingly obvious that it's the better way. By going after higher interest rates first, you'll get out of debt faster and spend less money over time. Math doesn't lie.
So far it hasn't mattered because my highest interest rates have also been my smallest balances, so the avalanche and the snowball have been the same. But now my next highest interest rate card is my largest balance, so it will be a while before I get that one down to zero.
The income at my solo law practice is highly variable because I work on contingency and there's a very long lag time between doing the hearing and getting a decision. I'm usually paid (if I get paid at all) about 9 months after I do the work, so I can't really ever count on it. I've structured my budget so that I can live off of what I make at document review, and then I use the earnings from my solo practice to pay off my credit card debt. If everything goes according to plan, I should have all of my non-student-loan debt paid off in 9-12 months. This is nothing short of a miraculous turnaround because just a year ago, I was on the verge of declaring bankruptcy to get out from under the mess I'm in. I decided to hang on, and I'll get out of my problem without trashing my credit or stiffing my creditors.
Once the credit cards are paid off, I'm going to set aside several months of living expenses to see me through lean times and then quit at doc review. My next step after that will be to buy a house and then attack my student loans.
I'm still broke, but I see the faint glimmer of the chance of non-brokeness on the horizon.
I've scaled back at document review - I'm now working 20-25 hours per week because my solo practice is picking up. I'm doing about 15 hearings per month plus all of the case development that goes with that. I feel like I spend so much time on the phone.
And...I have some good news to share! I paid off two credit cards this month, and I'm really close to paying off a third. It's so empowering to see the balances drop each month.
There are two philosophies on debt reduction - the snowball and the avalanche. Each one consists of making the minimum payment on all but the "target account" and then directing everything you can to the target account. The snowball method involves paying off debts from smallest to largest. The avalanche method involves paying off debts from highest interest rate to lowest interest rate. The snowball method has a lot of supporters, but I do the avalanche method because it's so blindingly obvious that it's the better way. By going after higher interest rates first, you'll get out of debt faster and spend less money over time. Math doesn't lie.
So far it hasn't mattered because my highest interest rates have also been my smallest balances, so the avalanche and the snowball have been the same. But now my next highest interest rate card is my largest balance, so it will be a while before I get that one down to zero.
The income at my solo law practice is highly variable because I work on contingency and there's a very long lag time between doing the hearing and getting a decision. I'm usually paid (if I get paid at all) about 9 months after I do the work, so I can't really ever count on it. I've structured my budget so that I can live off of what I make at document review, and then I use the earnings from my solo practice to pay off my credit card debt. If everything goes according to plan, I should have all of my non-student-loan debt paid off in 9-12 months. This is nothing short of a miraculous turnaround because just a year ago, I was on the verge of declaring bankruptcy to get out from under the mess I'm in. I decided to hang on, and I'll get out of my problem without trashing my credit or stiffing my creditors.
Once the credit cards are paid off, I'm going to set aside several months of living expenses to see me through lean times and then quit at doc review. My next step after that will be to buy a house and then attack my student loans.
I'm still broke, but I see the faint glimmer of the chance of non-brokeness on the horizon.
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