Learning the art of squirreling money away took years and a lot of trial and error—I made plenty of mistakes. But by 27 I saved up enough to quit my job and today, 3 years later, I am still living and traveling primarily off my savings.
If I could magically go back in time and visit my broke, 22 year-old self, this is what I’d try to bang into his thick head from the get go.
1) Spending less than you earn, rather than earning more than you spend, will free you from the treadmill of more. Expenses tend to notch up with earnings—the result being more stuff, more responsibilities and less time and energy. Learning to live simply and within your means (and how to enjoy it) is one of the best investments you can make. Learn to live like no one else so you can live like no one else.
2) Building wealth is a habit. It’s the result of thousands of micro decisions. Set up a system that serves your goals in the long term and work on developing your money discipline in the short term. It’s a practice. It doesn’t happen over night.
3) If you cannot pay cash, you cannot afford it. Wait until you can. You may find by that time you actually don’t want it anymore. Either way stay out of debt at all costs.
4) Know why money is important to you. Freedom, flexibility, security, education, kids, investing in yourself, impact, travel—what does money mean for you? Money is not inherently motivating. It’s the meaning we give it that is. You will be more motivated to save if you know what you are doing it for. You will also make better decisions with money if you know what it is you want from it. Keep visible reminders around you so you don’t forget. Recently a friend of mine shared a mantra he uses that I really like: “there are things I value more than feeling good.”
5) Build a safety net. A safety net allows you to keep living your current life in the face of financial challenge and uncertainty. It provides a base level of security and enables you to make changes in your life that may be risky but worthwhile.
6) Build a runway. Your runway is how long you can operate without income before being forced to get a job. Building a runway gives you the independence to pursue that passion project full-time, travel or make major lifestyle changes that others can’t. It buys you time and space to reinvent yourself.
7) Make saving unconscious. Make it your default mode. In other words, it’s what happens when you do nothing. Save first, then figure out how to get by on what’s left. Most people operate in the opposite order.
8) Make spending hard. The more effort it requires to spend, the less likely you are to rack up unnecessary expenses. The idea here isn’t to not spend at all, it’s to be mindful and intentional about your spending so that the things you buy truly add value to your life.
9) Make spending painful. The best way to change your bad spending habits is to be aware of them. This isn’t to be masochistic—quite the opposite actually. Pain is highly motivating and can be a strong ally in fostering meaningful change.
10) Your financial transactions are a record of your past priorities. Wherever your money went—those were your priorities. Don’t fool yourself into thinking otherwise.