Financial freedom is possible. And it’s within your reach. But it all starts with spending less than you earn. It sounds stupidly simple and the problem is that too many people fall into the dangerous trap of doing just the opposite: spending more than they earn and this starts with getting swept up into the habit of spending more as their earnings increase!
The more you spend, the bigger your bills which means more money is leaving your pocket. Every single month. From mortgages to car loans to credit card debt. So we’ve now got a situation where you’re having to work 10x harder just to keep up with this lifestyle. (Psst: read here why 36% of earners on >$250k salary live paycheck to paycheck!)
Being rich is as much about what you don’t do with your money as it is what you do with it. We know that investing can help grow your capital over the long-term and that saving can certainly help us get there. But the lifestyle you choose and the things you buy (or don’t buy) will all massively impact your finances. For better or worse. It’s up to you. As will the person you marry btw! Read here why you must talk money before marriage.
Keep it small when you have it big
It can be terribly tempting to want to upgrade your lifestyle when you get a pay rise or a chunky bonus. But resist the urge to do so and I guarantee you you’ll be richer for it. A friend of mine recently wrote a piece about how she would never spend a dime of her bonuses. She simply saved/invested it. Stashing it away, like it never existed in the first place!
And that’s the best way to do it. Because if you use your salary wisely, it can help you retire early and give you time and money to do the things you love. But most people don’t look at it that way. They treat more money as more spending. And that’s the start of the rabbit hole…
Live blow your means
If you start to live above your means, this means spending more than you can actually afford. It means driving that fancy car (on credit) and living in that house (with a whopper mortgage). Meanwhile you’ve gotta work extremely hard just to ensure you’re able to pay the interest on your piles of debt.
You become like a hamster on a wheel. And it’ll be near to impossible to reach financial freedom. To get to a place where you aren’t tied down to debts and money obligation. It’s going to be so hard since all you’re really doing is working harder to spend more and accumulate more debts. This does not smell like freedom to me! Wanna boost your freedom? Read here what you should do the minute you get paid.
If you choose to live below your means, to spend way less than you earn, then you’ll be on the path to financial freedom. The less of your pay-check you spend, the better. But it all boils down to resisting temptations and being able to say No.
This two-letter word really is the key here! It’s not nearly as glamorous nor exciting to live a simpler life, filled with fewer luxuries and whatnot. But you want to do that now, for as long as you can – while you still can, so that when you’re old and grey you’ll be living in the lap of luxury. Enjoying your retirement. As you should be!
I read this excellent quote: “You can be twice as rich by deciding you need half as much”. And it really is that simple. But no one said it’ll be easy. It’s not. But one thing it will be: worth it.
Think about your future You
This whole living-above-your-means thing stems, in part, from trying to keep up with the Joneses. The need, and very natural want, to impress those around us. To show them that we’re doing well. That we have money and so on.
Too many people spend money they don’t have all to impress people they don’t like. But the only person you should be impressing is yourself! And the only one left paying your bills will be yourself. (Read here how to master these 5 simple habits to upgrade your finances in less than 1 year).
Only take on that which you can realistically afford. Because debt is fine when things are going smoothly but the minute that something unexpected and nasty happens, unless you’re prepared, things can get real ugly real quick.
More debt also means you’ll need a way bigger emergency fund which most people don’t give much thought about. They take on the debt without realising the whole domino of problems that could happen if the worst happens (like losing a job).
You can leapfrog to financial freedom by deciding to live below your means. This means buying the car that suits your financial needs, buying that property in the area you can afford and sending your kids to schools that fit your needs instead of stretching yourself to the limit whereby you’re working to keep up your lifestyle rather than building your nest egg.
The more you save/invest, the more you’ll have later down the line and the better your lifestyle will be. We’ve all gotta sacrifice something to get to financial freedom so I’d much rather sacrifice things now than when I get older! It means not splurging out on things I want but rather waiting till I now I can properly afford them.
I have this rule that if I can’t afford to buy it twice, I won’t buy it once. This helps keep me in check and stops me from making silly purchases that I can’t realistically fund. Whatever you buy, make sure that it’s within your means. If not, you’ll just regret it later on.
Plus, it’s so much easier to scrimp and scrape now than if you were in your 60s! Do what you can now to set yourselves up for financial success. And it all starts with living below your means. That way you’ll always have the financial upper hand. You’ll never be tied to unrealistic amounts of debt or bills you can’t realistically handle without working yourselves to the bone!
Money is not meant to feel like a burden. And the minute it does, it means something’s gone wrong. The minute you’re losing sleep over it and missing out on family time just to land some more buck to keep up with your new and expensive lifestyle, something’s gotta change.
So, dear reader, it’s time we forget about what others are/aren’t spending money on and start focussing on what we’re doing. What works for us rather than what works for others. Personal finance is personal and we all have different needs, hopes and dreams.
Learn to live your dream; not others.
And your dreams can all be made possible by living below your means.
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.