Money

Are You Missing The Point?

The guy I work with buys lottery tickets.  He says it’s just fun to think about what he would buy with the money if he ever won.  This lead to a conversation about retirement, specifically, how much money you need to retire on.  I mentioned that I followed a few bloggers that were able to retire in their early 30’s by sometimes spending only 5,000 a year.

My coworker’s response was: “yeah, but you would have to live like that for the rest of your life.”

I will agree that living off $5,000 a year is an extreme case.  I’m sure most of the extreme early retirees are living off a lot more than $5,000 a year, but that wasn’t the point.

The more I talked about how these bloggers lived to reach early retirement the more I could see him checking out of the conversation.  It’s like a wall went up.  I could see that it wasn’t in his reality that people could actually be happy, and even prefer, living below their means.

I feel that most people share my co worker’s thinking went it comes to early retirement.  Why retire early if that life has to be one of deprivation.

My thinking tends to be why spend my entire life working for money to buy things I know aren’t really going to make me happy.

Does one live a life of deprivation if they ride a bike instead off a gas guzzling SUV? Does one live a life of deprivation if they cook every night instead of eating out at fancy restaurants?  Does one live a life of deprivation if they use a burner phone instead of the newest iPhone?  I don’t feel deprived.

Saving money with the motivation to consume more is missing the point.  FIER is not about amassing wealth so one day in the future you can spend it recklessly.  FIER is about gaining control over one’s time (the most valuable commodity), avoiding conspicuous consumption, and becoming less dependent on the financial system in general.

Do you fantasize about what you would buy with the money you save?  Or do you fantasize about how you will spend your time when you no longer have to worry about money?

If you fantasize about the latter you’re approaching FIER from the right place.   

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Financial Independence Is Earned A Dollar At A Time: 8 Tips To Cut Costs Now

The last few weeks I’ve become more aware of my purchases.  I looked at my most recent bank statement and thought what can I cut out?  What are the things that are totally necessary and what are the things that I can live without.  You will notice that most things you can live without or have alternate solutions.

In today’s post I’m focusing on the small purchases that add up.  Usually these are the purchases we rarely pay attention to, like the $3 coffee we get every morning.  I’ve excluded major purchases from the list like housing, transportation, health care etc.  These expenses are harder to tackle.  The smaller purchases usually can be fixed immediately, if your willing to give up some convenience.  Here are 8 ways you can save money now:

1.  Stop buying coffee out:  A $3 coffee every day is $21 a week, $90 a month, and $1,095 a year.  Taking a few more minutes to make coffee and put it in a thermos is well worth $1,095 a year.

2.  Drop Spotify or Pandora:  I used to have a subscription to Spotify.  I only used it while I was working out.  That was $10 a month/$120 a year.  Might not seem like much, but not worth it for how rarely I used it.

3.  Drop the gym membership:  If you live in an area where it’s nice all the time there is no excuse to be part of a gym.  Get outside.  It’s a little different for people in cold weather areas.  I get it, I live in Maine.  With that said, you should cancel your membership once the weather gets half way decent.  There are enough ways to stay fit without gym equipment. 

4.  Drop your cable subscription:  Who watches TV nowadays?  Get Netflix and watch on your computer.  The average cable subscription cost $103 a month.  By dropping cable you’ll save $1,236 a year and free up more time do something productive.

5.  Drop kindle unlimited:  Kindle unlimited isn’t a bad purchase if you’re really into erotic, but a lot of books you’ll end up paying full price for even if you have KU.  Go to the library instead. It’s free.    

6.  Change your phone plan:  I couldn’t believe it, but the average American spends $110 a month on cell phone service!  This is unacceptable.  If you want to save money on your plan go with Ting.  That’s the service I use and average about $16 a month with it.  Republic Wireless is even cheaper.  Or you can just go with the old burner phone.

7.  Stop smoking cigarettes: First and foremost, you should stop smoking cigarettes for your health.  Second, you should stop smoking cigarettes because it will save you tons of money.  The average pack of cigarettes cost $5.51.  It may be higher depending on what state you live in.  If you live in New York it will set you back $12.85.  If you’re a New Yorker who smokes a pack a week you will be spending $668 per year on a stick that slowly destroys your lungs.

8.  Give yourself haircuts:  I haven’t paid for a haircut in years. I use a number #2 shaver and give myself a crew cut.  This may be extreme for most, especially the ladies, but if you feel confident you can cut your own hair give it a try. The average haircut for an American man is $28 and $44 for women.  If you’re a man who gets his haircut once a month your spending $336 a year.

Conclusion

So let’s say you’re the average American Joe.  You have a subscription to cable, Spotify, Kindle Unlimited and a ridiculous high phone bill mostly because of all the data you use.  You wake up and grab a coffee every morning via Starbucks.  You smoke a pack a week to take the edge off.  You have a gym membership at Planet Fitness for $10 down and $10 a month.  You get a haircut every month because you want to look fresh.

If average American Joe were to give up all these expenses he would free up $3,323 a year, if we go by the averages.