There are two ways to earn money, from labor or capital. When you perform services for a paycheck by your physical or mental efforts, you are paid for your labor. If you save $400 plus dollars from your paychecks and buy one share of Apple Inc. (which some of our clients own, by way of disclosure), then you might earn from your capital. I say might because there is no guarantee that investment capital will successfully make money, even in Apple stock.

There are two ways to earn money, from labor or capital. When you perform services for a paycheck by your physical or mental efforts, you are paid for your labor. If you save $400 plus dollars from your paychecks and buy one share of Apple Inc. (which some of our clients own, by way of disclosure), then you might earn from your capital. I say might because there is no guarantee that investment capital will successfully make money, even in Apple stock.

If you have no capital now, you must obtain it by controlling your living expenses or working more so your income exceeds your expenses. Last week we said savings are best obtained a little at a time. This is great news for most people because we do not need a large bonus, a lottery winning or the like. How can anyone save some money?

Emergencies and impulsive purchases are enemy number one. In order to solve the first, you must save $1,000 or more in a separate savings account of any sort. Auto repairs and appliance breakdowns are guaranteed to happen. Therefore, you must be prepared and not use credit cards to fix them.

Rule number one is to know how you are spending each and every dollar now. Then write out a spending plan for every dollar before you get paid. Some people plan the night before, some on payday evening, but the earlier the better. If you are married, plan together and reach agreement. Impulse spending by either destroys the plan and hurts your relationship. For more on this, get a copy of “Complete Money Makeover,” by Dave Ramsey, from your local public library or borrow a copy from a friend.

Distinguish needs from wants. Tap water is a necessity. Bottled water, alcohol and soft drinks are not. You will not die without a purchased latte, sweet tea or whatever per day. If required, get your caffeine in the morning by making your own coffee at home for pennies.

The same principle applies to lunches and eating out in general. Here is a tip from Jim Stowers, founder of American Century Investments, when he found he was not happy with what he spent on lunches, while also gaining weight and not even enjoying them. In his “Yes You Can ... Achieve Financial Independence,” (p. 236), Stowers relates the following: “I decided I would solve three problems at the same time. If I brown-bagged lunch each day, I could: Eat what I wanted (a peanut butter sandwich), eat less and lose weight, and invest the difference. This I did and still do. If buying lunch costs $5 a day, the amount for one week is $25 … more than $1,200 a year. My sandwich costs only about 50 cents a day or $130 a year. The rest is saved.”

This wisdom comes from a man who, along with his wife, is giving away a billion dollars to charity. He is a hero capitalist in my opinion, and there are many others like him. Although the son and grandson of medical doctors, Jim and Virginia Stowers understood what each dollar means toward investing capital. They concentrated upon being absolutely satisfied with the way we were spending their money. How is that working for you? It makes a difference.