The path to financial independence didn’t really have to start off as a path. If you or I would have started with a little more forethought or listened to those around us, we may have never found ourselves in the clutches of debt or credit. No sense in lamenting the fact that we gave in that crybaby-temper-tantrum-throwing two-year old inside us. What’s done is done. So let’s revisit how we got there so we can identify the things that got us here in the first place.
Here are three sure-fire ways to wreck your financial independence.
1. Spend All You Make
The first sure-fire way to wreck your financial independence is to let your expenses consume all you make. One of the fundamental rules on the path to taking back control of your financial life is to save more and spend less. More specifically, it’s to increase your savings rate. But I hear your inner crybaby whimpering, “But I want that new mobile phone, pair of shoes, soda from the convenience store, etc.” You get the point. We have no idea how much these expenses rob from us over time. “But I ‘need’ it!” We will talk more about what you really need in another post. But let’s just say it. No you don’t.
2. Don’t track your expenses
The second mistake I made, like most, was I really had no idea where my money went. I was a pretty smart guy, so I thought I had a good “feel” for where my expenses were going. Yet somehow when I added up what I was bringing home I would wonder, “This much money should be able to leverage a better life than I have.” I thought that I just didn’t have a true understanding of how much a person needed to make in order to have a good life, and wrongly concluded that I just needed to make more.
Over time, that also proved to not be true, because if I made more, I spent more. All the new-found margin in my income went to other frivolous purchases. Hey, I was working hard and getting raises and promotions. I deserved it, right? Again, let’s just go ahead and say it. No I didn’t. If you want to think that way, it will wreck your ability to have financial independence. So I’ll say it to you, no you don’t either. Of course you could choose to spend it on yourself in superficial ways that won’t really bring you any lasting happiness. Knock yourself out. But I bet you’d be surprised at how much you’re spending a month on lattes, potato chips, and eating lunches out instead of brown-bagging it.
3. Don’t have a budget
Most people think that tracking your expenses and having a budget are the same thing. Sure, they could be. I just think it’s a vital step to pre-plan how you’re going to spend. To not only know where your money is going but to tell you’re money where it will go. That’s a budget. The word often causes sphincters to clench and hearts to race. You know why? Because of that inner crybaby that wants what it wants and wants it now. Once I wrote a budget and started living by it and saw the power it has, I began to appreciate it and even develop some sort of affection for it.
Over time when it gave me back control of financial life and even the power to predict the growth of my financial margin, I dare say I began to enjoy using my budget. In fact, if you really write a budget you will realize that you likely don’t have room for buying those drinks at the club or super-sizing your value meal. It may not be that you couldn’t afford it but simply that if you do you won’t have anything left over. I plan to make a free tool that will help people make a budget and track their expenses. I really want to do something about all the financial bondage I see around me. I’ll post about it and give download links once I do.
There are more ways to wreck your financial independence…
There are so many more things we do that wreck our financial life, and most of us do them regularly. I will likely write follow-up posts to help you identify them. I also hope I can help you do something to change. While I’m not completely there yet, I’m close. In the the not so distant future is the light at the end of the tunnel, and I have a plan that’s working and getting me and my family there. I even work in the social services, non-profit sector. I don’t have a history of making that much money. Yet somehow, I have been able to dig out and start building a chunk of cash that’s starting to work for me. So I’ll end this post by just saying it.
You can do it, too!