This guest post is from The Digerati Life, a personal finance site based in Silicon Valley.
Comedian Jay Leno, in an interview with Reader’s Digest in one issue, was quoted as saying that he didn’t use his revenues from working in television for his daily expenses. Instead, he prefers to apply the income he receives from performing in the stand-up comedy circuit towards his expenses. This unique way of managing his finances apparently helps him to build a nest egg for himself, ready for use when he retires from show business.
Whether or not Jay Leno actually uses his money this way, it almost doesn’t matter. What is important is that we take note of a few lessons from his strategy.
1. Develop multiple streams of income. Using the surplus as the living allowance is actually a little odd, if you think about it, because most people live on the “bread and butter” and then save the “surplus.” But Jay Leno’s unique method may work in the long run: if his stand-up comedy revenue is actually substantial, it can be pretty comfortable to live on. And since he’s able to save the bigger portion of his income, it can become a considerable stash of cash: more than enough for his retirement. Most likely, it’s been going into sensible investments, which could more than double his assets by the time Jay Leno may think about cashing in his funds.
Application: If you have a “day job,” you can look for a part-time job that you can work on when you get home from work. There are night shift jobs that you can apply for and work on when you’re done with your 9 to 5. On the other hand, the Internet is full of part-time work at home jobs, or even projects that could suit your expertise. For instance, you can find out more about how to make money through blogging. Should the income from the part time work be enough for living on, by all means, save your 9 to 5 paycheck in full. Or, you can endeavor to get your part time income to a level that’s enough for your living expenses; that way, your paychecks can be sent straight to the bank, whole.
2. Live frugally. Jay Leno is actually well-known for his frugal mentality. He learned about hard work early on as he built his career and he continues to be wise about handling his finances. If a celebrity can avoid living a profligate lifestyle, so can you; you surely don’t need to keep up with the Kardashians or the Hiltons.
Application: Maybe there are some things that you could do without. Some gadgets that you don’t really need to buy, or some big purchases that you can put off until the next year. You can work out a disciplined cycle for your purchases of “wants”, i.e. buy a cellphone only once every three years, or get a new laptop computer only once every 5 years. Things like these may sound simple, but could actually help you rein in your cash flow. You could probably benefit from a savings management account like SmartyPig, as well. Saving for your purchases would be easier as you see your cash flow organized. See how you can save and race out of debt with our review of SmartyPig.
3. Set up a savings plan. You don’t need a radical savings plan to make progress with your savings. Jay Leno’s story though, is an inspiring one, as it makes us realize that even celebrities are able to adjust their lifestyle to their earnings. You may find yourself able to do a better job with your finances when you become committed to managing your secured credit cards, to saving for emergencies, and perhaps to investing with the best stock brokers around.
Application: List down the things you are willing to do without. It could be a pizza that you have weekly, the steady supply of ice cream in the freezer, or the stash of Snickers you just have to keep for midnight snacks. It’s a good way to save some dollars here and there! For example, you used to have pizza 3 days out of a week. Let’s say you usually have the $12 pizza from Pizza Hut. That’d add up to $36 a week. Multiplied by 4 weeks out of a month, you’re actually spending $144 a month on pizza alone. If you cut back on pizza and made a resolution to stick to only one pizza a month, you’d be saving a total of $132 a month. Just add $67 and you already have enough for an iPhone 4! Who would have known that pizza can cost so much, stacked up, eh? Imagine what you can buy if you live without it!
Of course, most of us aren’t as wealthy as Jay Leno, but elements of his personal financial style worked into our own system could do us a lot of good. A frugal mindset never hurt anyone. In fact, it’s what made billionaires out of people like Warren Buffett and Sam Walton. There’s a lot here to be said about these great examples of successful people who are also frugal at heart.
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