If you choose to be less dependent on a job, having a big debt to pay off or have a specific goal you have to save money for, you want to put some money away every week, month or year. Saving money is and has always been a wide spectrum of all kinds of opinions and methods. Especially in the FIRE community.
And we all know, money can make a difference in your life. Even a huge one if you let it. We are all searching for ways to invest, pay off more debt or build up wealth. It can make life easier, it can give us the rest we desperately need, or it can speed up the process to fulfill our dreams.
The focus lays foremost on the money part, but what happens when that focus shifts from working on your money goals, towards working on your life goals…?
As it comes to building wealth, in the Personal Finance community, there are two sides:
Reduce spending (and save a butt load of money)
Boosting income (and save a butt load of money)
A common question is, what side to choose? And the answer is: neither and both
If you’re focused on reducing spending, there are numerous ways on how you can do it. You could cut your cable, eat less expensive, buy second-hand items or grow your own vegetables for example.
The same goes for boosting income. You could find a side hustle, blog for money, invest in assets with a strong cash flow, build on your professional career (and promotions) or sell your home grown vegetables online.
In the end, everything you have left after spending, are your savings. It’s up to you what you will use it for.
No matter how you do it, the focus will be on increasing the gap between what comes in and what you spend.
Most journeys in the blogosphere start with getting your finances in order. You start tracking what you spend every month, and can easily spot a few things where you think, why on earth do I spend so much on late/clothes/movies?
If you reach a comfortable level of living, this could mean you would want to maintain that same level after you reach financial independence. It’s all about finding the balance between income and spending. And once you have found your lifestyle level you’re comfortable with, lock your spending level. And focus more on growing your income.
This just isn’t the way for everybody. To me, in all honesty, there is more to life than having the money part being my biggest priority.
We have been tracking our money going out, and still, do. I just don’t do much with the insights it gives me. I’ve started budgeting, it wasn’t our thing. I’m tracking our dividend income, and write reports on it every month on this blog. It motivates me but doesn’t feed to my purpose in life.
What we did notice, however, is while our initial focus was only on reducing our spending. The last year or so, it shifted more heavily towards building income streams. Not only because we think it will give us more return in the long run, but because we like the things we do and it provides us with a second or third income stream. We do those things, blogging/investing/hustling because we like doing so. And we want to do much more of this because we like it. We want to craft our lives around the things we love doing. I don’t like waiting for the moment until I get there… Why should I? If I can make a living from doing what I love?
If you like to focus on reducing your cost by watching pennies and looking at debt as a bad thing… Our mindsets are not alike. And that’s perfectly fine.
Paying off debt brings a lot of comfort and security. For many, it’s a perfect fit to their risk appetite. For us, it’s one of the only options we have left to reduce our spendings. Instead, we chose to further increase our debt so we can buy more rental properties and stocks. We have a rather high risk/reward tolerance and our strategy is about investing in income producing assets. Which is also why we chose to invest, instead of paying down our mortgage. Additional we try to focus on our career path and making it the best we could.
How you should do this, depends on your own personal situation and your risk/reward tolerance. Only you can decide what this should be. And how far you’re willing to go.
My focus and mindset are constantly shifting. I don’t feel connected to the uber frugal way of living, and I’ve realized I’m ok with our current spending level. And when we do earn more money, we might spend a bit more. But as long as our income is sufficient, and we have enough left over to invest, who cares?
I don’t know what I will do when I’m financially independent. I won’t stop trying to achieve it. But in the meantime, I want to get the most out of what life can offer me. Time is the only non-refundable asset.