“If a man empties his purse into his head, no one can take it from him. An investment in knowledge always pays the highest return.” – Benjamin Franklin
Every successful business dedicates a certain amount of resources to trying new things. Research and Development (R&D) is what business leaders around the world count on to determine what the company should work on next. Large companies spend millions (sometimes billions) of dollars in speculative research every year, experimenting with new techniques and processes in order to enhance their capabilities.
R&D exists because it works – companies that make research and development a priority often discover new products to offer their customers or process improvements that meaningfully contribute to the bottom line.
If it works for them, it can work for you.
Making R&D a Personal Priority
What would it look like if you set aside 10-20% of your monthly income as a personal R&D budget? Using the techniques discussed in I Will Teach You to Be Rich and Your Money or Your Life, it’s remarkably easy to automatically divert a certain amount of your monthly income into an account earmarked for self-directed R&D. That money can then be used – guilt-free – in any way related to improving your skills and capabilities: purchasing books, taking courses, acquiring equipment, or attending conferences.
Personal finance gurus might disagree with me here, but I think having a robust personal R&D budget is more important than maximizing savings. I’m all for having a well-funded emergency account and saving a minimum of 10-20% of what you earn each month, but savings can only get you so far. Investments in improving your personal skills and capabilities can simultaneously enrich your life and open doors to additional income sources. New skills create new opportunities, and new opportunities often translate into more income. Your ability to save is limited; your ability to earn is not.
How to Fund Your Personal R&D Budget
Here’s a simple planning exercise that will help you establish your own personal R&D budget: what would have to be true if you were already dedicating at least 10% of your monthly income to research and experimentation, assuming your current income stays the same?
Any money-saving tip you find on good personal finance blogs can be used to fund your personal R&D account. Here are some ideas to get you started:
- Keep your monthly living costs (rent/mortgage) as low as possible – renegotiate current arrangements if you can.
- Renegotiate your car insurance and credit card interest rates.
- Kill your TV / Netflix account and bank the savings.
- Make your own coffee / tea instead of going to Starbucks.
- Master low-cost / high-quality cooking. (Kelsey and I went vegetarian several years ago because it’s both healthier and less expensive.)
- Work out at home instead of paying an expensive gym membership.
All it takes is a little creativity and budgeting, and you’ll be well on your way to funding your self-directed research and development laboratory.
What are you doing to fund your personal R&D budget, and how are you planning to invest your funds?
(Photo credit: jherzog on sxxc.hu)
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I think about R&D all the time for work but never for myself. It definitely puts a new perspective on things. Thanks for the post Josh!
I take the train instead of driving. That allows me to spend that time (over an hour) on learning new things. In terms of funding that effort, the costs are relatively low. For me, it’s more about the time.
There is a lot of buzz on how fast the world is moving and how technology is changing the world. Why should we care? Because the turnover for skill sets are getting smaller and smaller. Expectations of customers are getting larger and larger. This post, and the personalMBA in general, points to the fact that an education does not end with an enrollment. Thank you Josh for all the inspiration.
I actually don’t think it needs to cost that much. Just read blogs and listen to podcasts, it can get you a far distance.
Nice post. I can’t agree more. I just finished reading “Your life or your money”, but I am not totally agreeing with the author either. It is one thing that your spending is out of control, but I have friends that don’t spend much and still struggle financial. You got to increase your value and become valuable in the market place. Quoted from Jim Rohn in the Art of Exceptional Living, “If you work hard on your job, you will make a living. If you work hard on yourself, you will make a fortune.” Spending 10-20% income to invest on yourself is a great idea.
Lemme see; sock money away for ’someday’, or use it to make my life great right now. Tough call.
I love learning, and even in my leanest times (um, like, right now) we find money for books and tools to always be learning, doing something new, experimenting.
If you stop learning, you’re dead, even if you keep moving.
I don’t have an official budget. But, I do consider it very important. I read a lot of books, webcasts, and other internet resources.
I always did have a personal ‘indulgence’ budget. But never looked at it this way. Your post surely gives a new perspective to it.
Thank you for sharing.
-Anand
I have been using those saving techniques to great effect recently (all debt but school loans gone!). And this has freed up a bit of cashflow.
I don’t yet have an R n D budget, but I do have a business fund which I set money aside for. I use this money for riskier investments, business ideas and most importantly business education (like the personal MBA
).
I think one of the most interesting things about using the savings techniques described is that as your income increases, if you are saving for specific goals, you don’t get frivilous and your net worth goes up without you having to change anything.
-great post
-Calin
It’s incredible how self-development is powerful, and I can’t believe someone (i.e. gurus) could neglect this way of growth.
For all experiences in life, human being have to spend something. Frequently a scarce resource like time, attention, or even money. Experiment growing in life demands us, of course, time to attention, which let us free to choose a proper destination to ours bills.
To measure a right destination, which are the highest costs, trade-offs?… saving money and neglecting yourself costs OR the cost of dedicating an amount to boost your knowledge? How risky is invest in the asset we are?
Like everyone here, I prefer not saving.
ThanX for the post, Josh!
Thanks for the important post.
I want to ask you to make this topic with multiple posts. Your idea for saving 10-20% is new to me. I will start to apply from today and other points are already I started to apply with me. Please cover more topic during the R&D how the best ways to manage time ? (may be this depends on man to man and where he lives, but this is the most important point also to keep up a job as a full time and doing the part time research as the long term investment in life.) because time s attached to money directly. Please make posts on this. I waiting………….
Thanks in advance.
Ok.more thing that i forgot to say in the previous post is to give any tool’s idea to managing budget every month to keep them written without knowing the basic knowledge of personal Accountancy. How to do it with a simple paper and pen.
*without knowing the basic knowledge of personal Accountancy.
with knowing the basic knowledge of personal Accountancy.
I enjoy my R&D every time I drive (audiobooks). I haven’t put much consideration into a special R&D budget, but I see the importance of having an allotment which will help us take our personal R&D seriously.
I love how Josh breaks the paradigm of standard “self help” advice
My R&D budget? I took a one year off!
- I improved my languages skills,
- I discovered a new culture, met a lot of interesting people,
- I did an internship on a new technology,
- I enroled a self-management course,
- I learned a lot about myself and clarified my life objectives,
- And I traveled to amazing places, enjoying photography…
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