I have been hearing a lot of this going around lately. Just feelings. They manifest in sentences like:
What’s the point? I am never going to be rich.
I just read an article that if you aren’t rich by 30, you’re screwed.
‘Personal finance’ seems like a trap and I don’t see how it can help me when I simply don’t make enough.
Saving all my money seems pointless at this point, I feel guilt when I don’t, but I will never reach wealth.
..and all of it makes me want to plead and say: NO! Please do not think this!
So I was thinking I would address some emotions of what is coming out of this and then offer some (hopefully) helpful advice at the end.
FEAR: “I won’t have enough anyway”
I get it. On a certain level, I completely understand when you’re someone making $30K a year, just barely making bills, let alone having to handle student loans, medical debts, and what have you.
You’re scared you won’t have enough. And it seems pointless. I will address this.
JEALOUSY: “They all make way more money than me and/or started earlier”
You and me both. I know you’re about to smash the screen reading this, but honestly, sometimes I browse accounts or read posts from early wünderkinds who started in the womb (like my son..), and they’re already millionaires at 25, whereas it took me until age 36 to hit that in my net worth. I GET IT. Believe it or not.
My level of jealousy goes pretty extreme in the sense that I am looking at truly exceptional individuals who have cottoned on far earlier than I ever did, on basic principles of saving, and it makes me feel like I wasted my youth. Sounds ridiculous right? It absolutely is. But I feel it anyway, and it’s a valid emotion, which means YOUR emotions are equally as valid to feel jealous of anyone else (including me), and I get it.
DESIRE: “I just want to enjoy my life”
Maybe you go into a bookstore, and you want to buy that book. You could technically, go home and put it on hold at your local library, or borrow it from a friend instead (in a month after they’re done with their copy), but you want it now.
Or you like the convenience of taking your reusable tumbler to the café and getting a hot cup of whatever to start your day, and it makes you feel completely grounded, along with your yoga classes at night.
…but when you think about doing any of this, a little green guilt monster jumps up on your shoulder and says: Should you be spending that? Aren’t you supposed to be saving? Do you want to eat cat food in retirement?
I get that. I hear it all the time actually when I spend money, and I try to not let it take over my mindset.
1. What IS enough?
This is a serious question. What is enough? Someone who lives in an expensive country or city, will need way more money than someone who lives in a smaller one. You can always choose to leave/move. Everyone’s situation is different because there are so many variables YOU can control such as:
- Where you live
- How much you spend each year
- What you do for shelter – rent, buy, or house hack?
- What you plan on doing now
- When you want to retire
- What you want to do in retirement – some people want to live on $0, some do not (like me)
As you can see, trying to figure out what YOU need, is a deeply personal issue as it may not just involve you, but your partner, your children, your parents, siblings.. whoever. I understand intergenerational wealth and help (I give quite a bit to my own family), and it is the reason why I keep working and like to stack up more than what I think we need as a family, because I may need to help other people in my family and in my life.
- How much do you need to save for retirement?
- What to consider when spending on retirement
- Different levels of FIRE (Financial Independence / Retire Early)
- Why early retirement people may be shortsighted
2. Any amount saved is better than $0
$10 is better than $0. $100 is better than $0. Do you see where I am going with this? ANY AMOUNT, is better than having NOTHING at all. If anything, having at least $10,000 may give you peace of mind when you are going through life, thinking: hey, at least I have $10K if anything happens (also called an “emergency fund”).
Same principle applies to retirement — Having $100K at the end of retirement is BETTER THAN NOTHING. I speak from indirect experience, paying for my aunts and uncles who have literally NOTHING at the end, save for a couple of thousand dollars. They are scrabbling through trying to make ends meet (too proud to take money apparently), and it wasn’t until they hit rock bottom that we found a solution (I supplemented their medical plans).
If they had $100K, we wouldn’t even be having this discussion. They could eke out another 5-8 years on that amount of money living super frugally, and we could have eased their fears and purchases along the way. Instead, we are basically paying for them, and now they are living on the bare bones safety net the U.S. supplies to seniors in poverty, and we are paying the rest to make sure the aren’t in squalor.
3. Comparison is the thief of joy
I am guilty as charged, as making it seem like what I do is easy. It isn’t easy, and it isn’t normal, I fully 100% acknowledge and want to say out loud that it is not doable for most people. But looking at my situation (very privileged, high salary, etc), is like if I would look at Oprah Winfrey and think: “I will never become a billionaire like her..” Her situation is not mine, and her accomplishments don’t take away from what I have accomplished.
I may (very likely) never ever reach a fraction of what she has as a net worth, but that doesn’t mean I am not happy. I am thrilled with my situation, even if I am not rich. Or half as rich as some people I know. I know what I have, is what I have accomplished and saved on my own.
- The Real difference between the Rich versus the Poor: A Visual
- Who do you feel pressured to keep up with?
4. Changes are incremental, not big bangs
Speaking of accomplishments on my own, changes I have made to my finances, have been small things over time. Had I started earlier, I’d have had more money. Had I saved more money before, and been more frugal, I would have been better off financially. A LOT of what I have done, was still not “perfect” if you’re imagining deprivation and bare bones living.
But my real key changes have been in my mindset, and small changes I made to the way I look at earning and spending money. I consider that I am paying myself first. I am #1 in the Path of Wealth, and I am willing to sacrifice certain things to get to that point, because I see the end goal.
5. What’s your real goal?
Your real goal is not necessarily money. At least, mine isn’t.
- Is it freedom? Can you now quit your toxic but well-paying job and do what you actually want to do?
- Is it options? For me it was feeling secure financially to be able to leave any contract I wanted and/or refuse to work if I didn’t want to.
- Is it just to have a sense of peace? Having a solid amount saved, can bring many people a deep sense of peace – “OK, even if something happens, I have got this”, and a load lifts off them.
You need to find out your ‘why’ that has NOTHING TO DO with money necessarily. It has to be about what that money represents to you in terms of mental and emotional peace.
6. Budgeting doesn’t mean deprivation
I think when people hear “budgeting” or “personal finance”, they imagine prison bars coming down over their money, and a guard watching over their every purchase and move. That is not at all how I see it because when I hear “budgeting”, I hear a money map for my goals:
Where is my money going? Will I be able to steal from one category to supplement another without jeopardizing my money goals?
I do not see it as a restriction AT ALL. I see my INCOME as the limit / restriction. If I make $2000, I can only spend $2000. I can’t spend more than that, and that already gives me the structure of what I can spend. So out of that limit of $2000, we have to do things like pay for basic needs: shelter, food, utilities, toiletries etc.
INCOME = $2000
- Rent: $750
- Utilities: $50
- Food: $250
- Other: $50
Total for basic living = $1050
What is left: $950
Out of what is leftover of my BASIC essential needs to live, then I put in my money goals – do I want to save $500 a month?, and if so, then I have $950 left to allocate, and if I want to hit $500 in savings a month it means:
$950 – $500 = $450 left for .. fun!
Well when I say “fun”, I mean stuff like anything above basic living expenses, which includes things like coffee runs, gourmet tea purchases, shopping, or maybe I want to set money aside out of that to cover my future vacations or a new car fund. Whatever it is.
It’s a money map for your goals
A budget to me, is an expression of my true wants/needs and my values. If I don’t care about shopping, I won’t bother putting amounts in there for it or saving for it. If I’d rather have more books and coffee a month versus a new shirt, I go for it. The point is you only have $450 to work with. When I say money map, I mean out of that $450, you put in some basic stuff like:
Hey I want a $50/month coffee fund, and a $50/month book fund, so I have $350 left over. Let’s put another $50 for miscellaneous, and this means I have $300 leftover. I’d rather save that into retirement savings instead of spending it. I am DECIDING to do this because that $300 will mean I can supercharge my retirement and maybe become work optional earlier.
These are the kinds of decisions being made with a budget when you see a structure to allot your money and tell it where to go. It isn’t a prison for your money, it is a map for your goals.
7. Make more money or lower your expenses!
I know this sounds dumb but it is something that could help a lot. Overtime, side incomes, or maybe just plain ‘ol asking for more money when it comes to negotiation, getting a new job, a promotion, or moving to a cheaper city or place to save money. Basically, if you are living tight on the edge, think about ways you can ease that tightness a bit by lowering your fixed expenses (like rent or mortgage), or making more money to help grease the wheels.
8. Automate it
If you get a promotion, take the difference and have HR automatically remove it from your paycheque. You won’t even see or miss it. I did that and removed a chunk for retirement even while I was clearing my debt, and by the end of 2 years I had about $7000 saved by “magic”. Other automations work like with your bank taking money out for your allocated funds (e.g. expenses, retirement, fun money), and pre-allocating where it goes so you aren’t thinking: Oooo look at all of this money from my paycheque, let’s go splurge! ….because your budget / money map, has already told you where the money has to go based on its alignment with your goals for your life.
9. Give yourself grace
Seriously. Take that extra avocado add on. Even if you go $3 over your Eating out budget, go for it. Life is too short not to be impulsive sometimes. What is ideal is if you match your impulsivity by baking it into your money map (budget), so that you have a buffer. You can also steal from categories. I used to steal money from my Eating Out budget to spend more on Shopping. Or whatever I decided was more interesting to me that month. Budget categories aren’t fixed.
10. Take more time
No need to push yourself to save $800/month if it is making you miserable. What’s the point of shaving off 3 more years on retirement if you’re angry and frustrated every single day? Ease up. Take more time to reach your goals. No one needs to retire at 30. Retire at 60, it’s still 5 years off the standard 65 age for retirement.
I hope this has helped encourage / motivate you. I really wish / hope that the personal finance bug bites everyone and makes them all excited about money, saving, retirement and mapping goals out for their life.