Recently I was watching a money guru on YouTube speak about what he would do if he wanted financial stability in 2023. He had many interesting things to say, primarily that you should always have your money working for you. I agree that investments to help your money grow should be a big part of everyone’s financial plan.
He said that people who focus on tightening their budget are going about personal finance all wrong. I disagree with this sentiment.
If you are a person who can increase your earning power to the point you can live off your investments - fantastic. However if you are part of the rest of us who are barely numerate, budgeting can be a way to gain financial stability if you don’t have the wherewithal that the millionaire class has.
Not all of us will be able to identify opportunity in the stock market. If we could there would be no issue of poverty, everyone with a buck would be investing and earning.
Only one in three Americans say they are financially secure. Additionally Americans report that they need to earn $233,000 annually to achieve financial security. This statement about annual earning is clearly not the reality for most Americans. The median income in America is $71,000 annually.
Clearly Americans will not see an increase in annual wages of $162,000. This is not reality. It’s not realistic to tell people that they must figure out how to make their money earn money. Most can’t do that.
What is the alternative? Frugal living. I argue that you don’t need all the “nice” things the gentleman mentioned when reviewing his life of extraordinary wealth. If you can get to the point that you have all the money you need and have all the “nice” things, please do it. But for the rest of us, we most likely won’t ever have that kind of income. So we have to find a way to do life differently.
In fact I find that more things are a burden. The more stuff you have the more stuff you have to keep track of.
Can you simplify your life and still be happy? Yes. You can find ways to overcome the burning desire you feel when you see your friend buying a new outfit. You can have a sparse closet with a capsule wardrobe that you accessorize so you look sophisticated and well put together.
You can find ways to be with the people you enjoy that don’t involve pricey cocktails and fancy dinners. I’ve mentioned this repeatedly that going for a walk in the park is free and you’ll have a better opportunity to relax and enjoy your loved one without the distraction of a menu and interaction with a food server.
I’m not saying never go out to eat or enjoy a meal with a loved one in a nice restaurant. I’m saying make it occasional and a real treat.
What about driving a fancy car? Do you worry people will judge you because you drive an older model car? Some people will. After a while your car will be a unique conversation piece if you take care of it and keep it in good running order. For example, when having my oil changed recently, the young man asked about the mileage on my 2002 Honda CRV. I told him I had 80,000 miles on my car, then I realized my car was likely older than the guy changing my oil! He smiled and said I have an awesome car. Imagine the credibility I’ll get in ten years from now, when my car is thirty years old with 120,000 miles on it, or when it’s forty years old with 150,000 miles on it. My spouse said the car I have should be good to drive well over 250,000 if I take good care of it. At the rate I put miles on my car it will take fifty four years to get it to 250,000 miles. I’ll be 115 years old.
The down side to having an older car is that it is probably more polluting that a newer car. Hopefully we’ll have autonomous cars on demand in the coming years and I can get rid of my car all together. I really don’t care for driving.
People have all kinds of reasons why they are not financially secure. Low wages, inflation, rising interest rates and more. They are not dealing with reality. I agree that all those economic factors are problematic, but the fact that those challenges exist won’t change their predicament. If you are a person who is earning a low wage you must do something different. You can find higher pay elsewhere, or increase your value in your current workplace and get a raise, or find side gigs to increase your earnings, and finally figure out how to live below your means.
Living below your means will increase your financial security and will spill over to other areas of your life.
I’ve found that since I started being mindful about how I spend money I’m also mindful about how I eat, how I exercise, how I spend time with loved ones and more. I get a real sense of pride when I exert control over my existence versus mindlessly going through the motions of life based on what others tell me is good.
If you haven’t started your frugal journey here are a few steps to jump start your voyage-
Understand your income and expenses, look for a free workbook on the internet.
Start small, go on a one month financial diet and commit to not buying anything. If it goes well try again.
Eliminate takeout meals and restaurant food. Download my book “Few Buck Lunch. Cook Food. Save Money” if you are unsure of how to start.
Figure out typical one off trips in your car and figure out how to combine trips to save on gas. For example, do you normally go to the grocery store as a one off trip? Try going after work on your way home. If you don’t like the crowds shop online and have your groceries waiting for you to pick them up. Several grocers offer this service in my area, check to see if you can do this in your area as well.
When you are planning on buying something, wait. Take a week to decide if you truly love and will use the item. You may not love it as much as you thought you did.
Commit to never using your credit card again. Do everything you can to keep that commitment. Being debt free will be the single most important thing you can do to increase your wealth.
Buy my book, “Never Worry About Money Again: Gain Financial Freedom By Becoming Better At Managing The Money You Have”
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