Hello Choice Millionaires!
How many people do you know get lost chasing a certain lifestyle?
Preeetttyyy much everyone around you, no?
I mean:
Mortgage for the house.
Credit payments for the car.
Monthly installments for all sorts of gadgets.
Credit payments for groceries.
And pretty soon, you start acting like the US government. You spend more than you make, so you continuously have to increase your debt ceiling, AKA credit limit :D
BTW you’ve just understood the debt ceiling problem. Subscribe for more financial literacy!
Now what’s the problem with all of that? Chasing a lifestyle.
You see because of all of them payments, you can’t quit your job that you hate.
You can’t say no to your manager when they reject your request for a vacation.
And when you’re asked to put in extra hours for free, you can’t really object.
You’re a slave to the consumerist society my friend. You work around the clock to pay the interest on your debt that keeps racking up.
You’re stuck so deep in the rat race; you can’t even get out if you want to.
That’s pretty uncomfortable, no?
What’s the solution?
The solution is to live below your means, always.
But to do that effectively, you need to know a few things. That’s why I called it THE ART OF LIVING BELOW YOUR MEANS. It’s an art, you will see!
Look, some people are just cheap. You don’t wanna be cheap. You want to be financially literate and smart. You want to be a CHOICE MILLIONAIRE!
The first thing you need to notice is that in the above example, we gave, all your debt is bad debt. But is there good and bad debt? Yes!
Bad debt is the debt you pay and get nothing in return; you keep paying more and more installments.
Good debt is the debt that makes you income
You pay debt for a car, but this car works as Uber and generates income for you.
You pay mortgage for a house, but you rent this house and someone else pays that debt off of you + profit.
You pay debt for a MacBook but use it to do work and get much more in return.
Etc etc
This is how your debt can be good debt.
Spend only to earn more
But in order to do that, you need to live below your means.
If you get paid 3000$/month, you can't spend all of it chasing a lifestyle. If you do that, welcome to the rate race.
But if you wanna escape and BE A CHOICE MILLIONAIRE, you came to the right place.
The first thing you need to do is to determine WHAT ARE THE ABSOLUTE NECESSITIES YOU CAN’T LIVE WITHOUT.
We’re talking water, food and bills. Deduct these expenses as they are unavoidable.
Afterward, you’re left with luxury. Here you can control the expenses. Start by letting go of everything useless. If you didn’t use it over the LAST 12 MONTHS, stop paying for it and let it go!
Suppose that this now makes you spend 2000$ out of a 3000$ salary. Now you have an extra 1000$. What to do with it?
I always save 50% and invest 50% But do I always do this?
No! I stop saving once I have funds to keep me going for 6 months!
So, if you’re expenses are 2000$/month you stop saving that 50% once you save 12000$
That means you go 100% into investments with all the extra cash. This isn’t a rule btw. Some people save 3 months of expenses for emergencies, and others save 12. Find your sweet spot.
Ask yourself, if you stop receiving income now, how long would you need to find an alternative source? Save as much as to sustain you.
Always think in percentages. If you spend 70% of your income, then you spend almost 2000$ and save 1000$
This means that when (HOPEFULLY) you start earning 100k$ you will spend 70k$ and save 30k$. If that number jumps to 200K$, then your savings will be 60$
As you can see it gets easier when you think about percentages.
The general rule
If I can live without it, I won’t get it. Why?
Because when you’re starting, you just have limited capital. If you invest the majority of your capital, then you get capital growth (DUH)
From the above example, it’s obvious that 30% of 30K$ is just 9000$, but 30$ of 100K$ is 30k$
This is why you want to wait on the luxuries for a bit. A 20k$ car is hard when you save 9000$/year, but it is pretty doable when you’re saving 30K$/year.
The more you allocate to investing when you’re young, the more you will be rewarded. Remember, when you’re young you don’t have much money. But your risk tolerance is pretty high.
But how to invest you might ask? Let’s find out in the next entry!
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love these advices! already following most of them 🙏🫡