Getting out of debt and staying out of debt is what frugal living is all about. Once you dig yourself out of the hole, it’s time to watch your weekly spending and start saving little by little. But the stark fact is that you will never get closer to financial independence just by cutting down on that delicious latte. There are more elements to that puzzle and in this article you’ll learn what they are.
Even if your disposable income is minuscule, still pay yourself first. You can deduct a certain amount from your paycheck each week and as far as you’re concerned this money is gone. You will use it to build your future investments.
Remember – you have to start somewhere. Even if it’s 1% of your income; start there. And then move up the ladder until you’re saving 5, 10, 20 or even thirty percent of your income. You won’t believe how fast your funds will grow at that point.
Secondly, have your income goals set for every month and every year. Keep strict accounts and know exactly where every penny is going. This will help you to stay in financial control. One of the most important things to look for at this point is recognizing where your money bucket is leaking.
Are you paying for services you’re not really using? Could you use cheaper substitutes? Is your bank ripping you off on hidden commissions you don’t even know exist?
Chris Moneymaker, who became a legend through his achievements at a poker table (he won over $3,679,716) attributes his success not to a flamboyant playing-style, but to extreme skills of observation and noticing even the smallest details about his opponents. Be like him – find out exactly what’s going on and stay in total control of your finances.
This approach will propel you forward into financial stability. The next step to take is all about increasing your income. Counting pennies will only get you so far. Once you’re stable, set new income goals. If you’ve earned $35.000 last year, aim for $45.000 this year. How are you going to do it? You have to use your creativity! Become more valuable at your work and earn a promotion, sell your old stuff, join a network marketing company, or start your side-hustle on the web.
And here’s the last thing. While increasing your income, you have to stay “broke” until you’re really secure. It basically means that you don’t get fancy just because you start earning some money. Stay frugal even when your income is substantially higher than before. Instead of spending your money on toys, channel it to your sacred savings accounts.
Then use these funds for your future investments in minimal cost index funds like S&P 500, bonds, or new business opportunities. In other words – invest the money you earn from your job into generating future streams of income. It will require some sacrifice on your part, but that’s the price you need to pay for financial independence. People who are financially successful develop multiple streams of income (10, 20 or even more) and that’s what ultimately leads to their unshakable security. You should do the same.