Life Liberty and the Pursuit of Debt
I would first say I am not an expert nor do I intend to preach from a high horse. My intent it to share knowledge and stories that might help you gain perspective.
The easiest thing in life to acquire is money. Yes you read that right. If you are reading this there is a pretty good chance you live in the greatest country in the world and your access to money is easy. I live in Huntington, WV and there are currently 559 jobs listed. I could have a job and a pay check inside of 2 weeks. I know you are saying to yourself, “those aren’t good jobs” or “they don’t pay enough”. Therein lays the rub. The issue isn’t the access to money, but the access to the money you think you require to live.
I hope this post provokes thought. I hope you challenge yourself to a concept: TIME. As anyone who has been massively injured or who has set next to a loved one who is dying, more time is the only thing they ask for.
Randy Travis said it best, “Then the nurse comes in with something for the pain and says "Is there anything more you need?" “Yeah, more life, more time and more faith”
Let’s rethink what the acquisition of money requires: time. You give someone your time and in return you are given a wage in which you use to live. You’re really buying time with time. Let’s say you make $20 an hour. You have agreed that you will trade your skill or service and in return you will receive twenty dollars. Now, the really hard part; You have completed your work week and walk away proud with your $800. On your way home you stop to buy fuel, Gatorade and lottery ticket at a cost of $60. You now have $740 left of your$800 but more importantly you gave up 3 hours of your life so you could buy fuel, Gatorade and a lottery ticket.
As children most of us were taught to save what we could and spend the rest as the reward. If you’re like me I would spend it all and asked for more. My mom calls it spoiled but I call it ignorance. If you are trading your time for money and using the money to enjoy your time, the only reward you’ll ever have is retirement, if you make it.
Living within your means is a concept most of us never figure out. We simply keep pouring out our cups to only find out we are thirsty.
A very good friend of mine who has more money than I probably every will explained something to me about debit I never would have considered had it not been for him. This friend is an investor who has figured out a way to make money without the requirement of time. Regardless of where he is or what he is doing, his wealth is growing. His advice was contradictory to every book you’ll ever read or any seminar you’ll every take. Let’s say you have two student loans, one balance $25k at 7.76% interest and one $5K with zero interest. You have $5K, what do you do? Any good accountant would tell you to pay $5K on the higher interest to save you as much interest as possible. Those people don’t take into account “the human element”. His advice was to pay off the $5K for the simple fact of reducing a monthly payment and only leaving one note with one payment. There is no mathematical formula that factors piece of mind. Although you will be spending more money in the long run, the weight of reduction you’ll feel by having one less payment supersedes the lost money in interest for most people. (I am sure my account would disagree).
The point here is simple yet extremely difficult to implement. Grab a pen and a piece of paper and write your monthly expenses that you require to have to live(your fixed costs, mortgage or rent, Insurance, utilities, CC payment, student loans etc.) and add that amount up. Then write down your variable cost (food, fuel, cable, phone, clothing and entertainment) and add that amount up. Your fixed cost can be adjusted but usually require time and larger sums of money. We are going to focus on the variable cost. Now, add up your total monthly income and divide it in half. Example $3,500 in total monthly income after tax, ½ would be $1,750. This should be the amount you should be spending on your fixed cost. The problem is your fixed cost is often out of necessities that required decisions prior to knowing what your income might be so this is sometimes harder to adjust. The remaining $1,750 then gets cut in half again. ½ of $1,750 = $875, this is the amount you have to spend on your variable cost, this means every month you have to budget knowing you only have $875 to spend on fuel, food or/and fun. The remaining $875 gets put into savings and will help you on your path to stop trading your time for money.
This is a sliding scale and there are many factors that all can’t be explained since each situation is different, but the concept and implementation is the same. Stop comparing yourself to others; stop living above your means. More money means nothing if you can’t manage what you already have.
“You cut the grass and the snakes will show and know your neighbor’s fertilizer is fake, don’t let it fool ya!” - Ludacris
As you get a better job and start making more money continue saving and remember the lower fixed and variable cost you have the least amount of time you have to trade to live. Time is the most valuable asset you will ever have. It is also the only asset you can’t accrue more of. Spend it wisely.
I read a very interesting article about perception of debit. Almost every person surveyed stated their perception of their financial past was bad but felt the future would be better. Some call that optimistic, but without a solid plan your hard work and determination will be wasted on fuel, Gatorade and lottery tickets. The hardest part of this isn’t the implementation of the concepts but the real truth of how far you have to go. I assure you, coming to this realization is the first step to financial independence. I spent most of my early life using the “spend and pray method”, don’t do that! Remember, the only way to safely double you money is to fold it and put it into your pocket!
Work Hard and Stay Humble, reward yourself with money in the bank and the security living a debt free life can provide.