http://www.getrichslowly.org/blog/2007/10/28/build-wealth-with-a-virtual-employer
Build Wealth with a “Virtual Employer”
Sunday, 28th October 2007 (by J.D.)
This article is about Money Hacks, Hints and Tips
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Here’s the longest “money hack” I’ve ever posted. This is another reader comment from our recent discussion about the transition from “becoming debt-free” to “living debt-free”. In this guest-post from James, who is new to GRS, he describes how he created a “virtual employer” in order to limit his natural spending habits. By playing games with himself, he was able to go from $20,000 in debt to having over a million in savings in just fifteen years. This guest-post is long, but I think it’s worth it.
How is living debt-free different than becoming debt-free? If you are rational (and fortunate) it shouldn’t be different at all.
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A tale of two employers
My real-life employer direct-deposited my paycheck into a money market account. This account used an automated bill-payment service to make deposits into my regular checking and savings account every two weeks. This last set of accounts was used for ATM transactions, and for paying all of my bills. Income into this account was my “salary”. I had to live within my means just like I ought. However, it was like I did not work for my employer, but for a fictitious employer. When I got raises or bonuses, they went into this fake employer’s money market account and did not appear in my salary — they were left to build my savings faster.
Once a year, I gave myself a raise by changing the amount of the bi-weekly salary that went into my personal bank accounts. My income kept rising, just a bit more slowly than in my real-life job. I never felt that I was scrimping because my virtual job was increasing my virtual salary faster than inflation. It took me about two years to pay off debt, and another 4-5 years to build up emergency savings and open a brokerage account and start investing.
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Here’s a great idea.
If only the tax code would let one be one’s own employer.
But, in any event, here’s a way to fool yourself into living within your means.
I think this is one of the more innovative things I have read.
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Reinke Faces Life 