When asked the first step to financial freedom or to get out of debt, most people will say that it is to make a budget or to cut out expenses. The next step is to save and invest. These are the basic steps to having success in reaching your financial goals. However, without changing your money mindset, it will still be difficult to attain and maintain those goals. One of the reasons why I really enjoy reading the blog written by Mr. Money Mustache is because his guide to financial independence is not a mere how-to guide to saving by budgeting and cutting expenses. He has made Mustachianism into a way of life! He explains that you can have a good life living frugally or said in other terms, you can be living rich cheaply! Whenever opponents deride his extreme sacrifices to reach “retirement,” he contends that he has a nice house, eats organic foods, and has plenty of “toys.”
In an article by Laurie from the Frugal Farmer, she wrote about getting out of debt and said that you should view it as a “lifestyle change” rather than a “diet.” I think that is an excellent analogy, whether you are talking about getting out of debt or pursuing financial independence. With a diet, you inevitably get off the diet once you’ve reached the desired weight. This is one reason why almost all diets fail. Once you’ve reached the desired weight, if you go back to your prior lifestyle, you’ll gain back the weight and have to diet once again. Not so with a lifestyle change. If you change your lifestyle to one where you eat healthy and exercise, you will very likely be able to maintain that desired weight without ever dieting.
Similarly, dieting in the personal finance world would be akin to cutting expenses by making “sacrifices.” If you see cutting expenses such as cable television, fancy clothes, eating out or other luxuries as a “sacrifice” and self-deprivation, then it will be very hard to reach your financial goals. Changing your mindset where buying fancy clothes and eating out all the time is not a sacrifice is key in making strides in your money goals. You have to learn the difference between a want and a need. You have to prioritize and do some soul searching and figure out what really brings you happiness. Is it spending quality time with your loved ones or is it buying an luxury items? But once, again, changing your lifestyle does not necessarily mean not having many of the things that the Joneses have. This is living RICH cheaply, not living cheap cheaply.
Instead of buying a luxury car such as a BMW or a Mercedes Benz, I bought a Hyundai Sonata used. Both cars get you from point A to point B. I’m sure the luxury cars have some fancy features, but I don’t really know what they are nor do I care because my car is perfect for me. It has all the latest safety features, it is comfortable, it is reliable, it gets me where I need to go, and I do think it is a pretty attractive car.
A lot of people need to have the latest tech gadgets such as the newest iPad which costs about $500. I already have a laptop, so there really is no need for an iPad. Actually the laptop has more functionality and was cheaper than that iPad. But I am a little ashamed to say that, I did buy a tablet as well recently. What can I say, I indulged myself. I bought the Google Nexus on sale (as the model has been out for a year), with a coupon, reward points, cash back for $125. I figured at that price, I could afford to indulge a little.
Fancy clothes? I’m not a slave to fashion and rarely need to buy new clothes. I like to think that I have a “classic” look so my clothes don’t go out of style.
Going out to eat? When I’m busy and tired I might not enjoy having to cook, but in general I’ve learned to love it. (My wife and I love watching cooking shows and competitions like Master Chef). I like trying new recipes and I like that the food I make is healthier. But yes we do go out to eat. We don’t dine at fancy restaurants that charge an arm and a leg. Why? Is the food better? Not always. Maybe the decor is nicer, but when I eat out, I’m there for the food not the decor. And of course, we always find deals when we eat out.
Instead of going out to watch the latest movie, my wife and I watch Netflix in the comfort of our own home. So no, I do not think we are depriving ourselves. We are still enjoying life. We’re just not spending as much doing it. We are Living Rich Cheaply!
How did you change your money mindset? When you cut out expenses in your budget, do you think you are depriving yourself something?