Lifestyle inflation is an easy trap to fall into, especially as you earn more money. But living within or below your means doesn’t have to translate to months of Ramen noodles and nights home alone.
Instead, it’s an opportunity to intentionally spend your money and bring more meaning and fulfillment to your finances.
Find Your Financial Sweet Spot
First, it’s essential to get past the idea of “enough.” Doing so erases the temptation to live in a scarcity money mindset and helps you focus on the positive, more enriching side of money.
Here’s the kicker: When you think about money in terms of “enough,” you find that there’s never “enough.” Experience has shown time and time again that you’ll always desire more.
Instead of constantly chasing what’s just out of reach, intentionally focus on finding what works for you.
- What are your top financial goals?
- How much do you actually need to reach them?
- Are your current financial habits supporting your path to achieving your goals?
Everyone’s answers, numbers, and paths will look different, and yours may even change over time. Maybe you wanted to open your own business within ten years, but the pandemic accelerated your timeline because you’re looking for a career that better aligns with your goals, values, and talents.
Once you know what you’re working for, create a plan to get there—invest more intentionally in retirement accounts, invest in your business (talent, certification, etc.), or whatever facet of life your finances can be a better anchor.
Start at the end and work backward to reverse engineer a strategy that works for you. What does the end goal look like? Say your goal is to have $5 million in net worth by 65. Then, break that goal down into yearly, monthly, weekly, and daily savings goals. All these micro-goals will add up to the bigger picture goal.
Breaking down the big goal into small, management chunks is fundamental to finding success. You don’t wake up one morning and decide to quit your job without a plan and expect financial stability. You carefully plan your next move step by step, so when you’re ready to move on, you can do so with confidence. What you’re after is a series of practical results and accomplishments, not unrealized dreams and abandoned projects.
Setting achievable goals will keep you moving in the right direction because it can inspire motivation and give you cause to celebrate small victories along the way.
In this way, you can think about “enough” as a sense of arrival as much as it is a quantitative number. There will always be more—it’s your job to define your version of victory and work towards it every day.
Say Goodbye To The Joneses and Other Overspending Habits
Fear of missing out, status symbols, and more can lead to spontaneous and irrelevant spending that doesn’t help you achieve your version of success.
Overspending now won’t help you get where you want to be tomorrow or even five years from now. In fact, when you overspend, you get further and further away from your goal.
Start thinking more deliberately about how your spending decisions affect you.
- Will purchasing that second home stand in the way of you retiring early or leave you strapped for cash and unable to pursue a career change?
- Does that second home even align with your definition of financial success?
Remember, your money doesn’t have to “prove” anything to anyone else but yourself; it’s there to provide for you and your ideal life.
Prioritize the things that genuinely matter to you, like education or financial freedom. If something doesn’t align with your goals, don’t feel obligated to direct your money toward it.
Shift Your Perspective To Live More On Less
The above statement might seem like an oxymoron—how can you “live more” while spending less? It’s all about your mindset!
- What do you currently spend money on?
- How are those purchases and habits furthering your goals, values, and vision for your life and legacy?
- Better yet, are they even doing that at all?
Before you dedicate a portion of your finances to something, first, ask yourself a question posed by Tim Ferriss, “Is this removing a negative from my life?”
By asking this question, you tap into a new perspective for direction on your spending. Instead of seeking abundance through addition, you see the potential for less being more—addition through subtraction, as it were.
Consider this phrase: I am not who I think I am; I am who you think I am, to you. What does this mean? It aims to show that sometimes we believe the life we portray to others is more important than the one no one sees—a glorified perception.
But you don’t have to use your money to create an illusion of wealth, rather use it on things that enhance your life. When you do so, you may be shocked to experience that less really can be more.
Return To The Financial Planning Fundamentals
No matter where you’re at in your financial life—whether you’re at the peak of your career or looking to retire, your financial foundation can help strengthen and solidify your long-term plan.
Start by evaluating your spending—where are you spending too much? How can you redirect that spending to other areas like retirement, legacy planning, debt, etc.? Evaluating your spending doesn’t necessarily mean that you are always looking for ways to cut it; spending can be a tool for happiness when used appropriately.
It’s so easy to forget but remember, the simple first steps provide you with a foundation to build on. Think about it like football: you have to learn to block and tackle before pursuing the highlight-reel-worthy trick plays.
We can help you create a process and routine that brings awareness around spending—similar to an annual checkup at the doctor’s office.
At a macro-level, ensure you spend less than you make!
A properly calibrated budget should allow you to spend on what you value and cut what you don’t. Our team would love to help you create a proactive cash flow plan that aligns your money with your ideal life. Set up a call today.