I used to be a heavy consumer. I mean, I spent money when I wanted, on whatever I wanted. As a police officer my base salary was $101,000 a year and my wife was making about $80,000.
$181,000 between both of us and the money left our hands just as fast as it came in. We had some good cash flow coming in every two weeks and we put none of it into investments or savings. We lived the high consumption lifestyle and loved every minute of it.
We bought $1000 strollers, ate out 4+ times a week, spent hundreds of dollars on clothing, and on and on and on. Some of you probably know someone like this, or maybe this is you.
The thing is, we didn’t even realize how trapped we were. We lived a risky lifestyle. We had two sources of income (our jobs) and that was it. If either of us lost our jobs due to unforeseen circumstances, our income would have been cut in half and we would have been forced to alter our lifestyle…fast.
We had no savings, no investments, hardly any net worth, and jobs that we were slowly beginning to despise as each day dragged on.
On our off days we would entertain ourself during our “free time” by spending money on greasy meals and outings. Don’t get me wrong, I love greasy meals and outings, but what I failed to realize was, I was robbing myself of the chance of ever becoming financially free. And since I wasn’t financially free, what business did I have wasting my hard earned money on things that didn’t build wealth or lead to financial prosperity?
When I spent all of my money on high consumption activities, I was actually robbing my own freedom. Because every penny spent was another penny lost…and another penny that couldn’t be used to fund my dreams of one day breaking away from the shackles of a job.
Soon after my wife and I got married and she became pregnant with our first child, she expressed to me that she wanted to stay home to raise our child. That’s when it really hit me, I realized that I had to tell her she couldn’t stay home with our baby and would eventually have to go back to work. This was all because the lifestyle we’d crafted required both of our salaries to fund it. Our high car payment, jumbo mortgage and high consumption lifestyle that we’d crafted wasn’t conducive to a one salary household.
At that point I realized that we’d built a life that didn’t give us CHOICES.
Before, I was blind to the fact that we were robbing our own freedom. Then I pictured myself still working for someone else on my child’s 18 year old birthday, with another decade to go before I could “comfortably” retire.
At that point I promised myself that I would lead our lives on a different path. The less travelled path that most people are scared to go down. A path that leads to financial independence.
Within 365 days of that revelation, both my wife and I had quit our jobs, moved 3 hours away, bought 16 units of rental properties, tried and failed at several businesses, and are currently working on acquiring more real estate as I write this post. It’s only been a year and I’ve accomplished more towards financial independence on less than 1/3 the salary than the previous 3 decades. But I’m still not close to where I want to be.
I’ve learned more about money in the past year than the last 31 years that preceded it. I now have a deep and profound respect for money and what it can do for me and my family. Before with my “easy come, easy go” mentality regarding money, it slipped through my hands like a stick of butter every time I came into contact with it.
Now, I must be more careful with my money due to my reduced salary. I must recruit my minions (money) to battle tactfully and with purpose. Every penny that I make now serves a purpose and is respected. Because if you don’t respect a penny, how can you respect a dollar, or 100 dollars?
I used to walk by money on the street, and think of it as dirty. Now, I pick it up and put it in my pocket. Because in my mind, it’s another freedom fighter that was lost in battle. And it deserves a new home, so it can be deployed again…but this time under my command.
I used to think that the saying “live beneath your means” was a poor persons saying. But now I believe that it should be every persons mantra. Because even rich people who don’t live beneath their means can find themselves in poverty.
I feel like I’ve started from the ground up with my money journey and ironically I have a higher net worth now on an income that is 1/3 of what I used to make.
I’ve had to drastically cut down my spending habits, and the reason I’m happier now is because I know that I’m building something that is going to free me from the high consumption spiral that I used to find myself in.
One of my favourite business leaders in the real estate space is Grant Cardone. He’s a heavyweight in the rental property market and I have learned a lot from his books. I’m reading “The Millionaire Booklet” for the second time, and one point really sticks out to me. Grant reflects on his early days of purchasing rental properties and his staying broke mindset when he first started out. He believes that staying broke and pouring all of your extra income into your investments is the way to riches. He used to have to beg his landlord to extend his rent payments a little bit longer, meanwhile all of his money was being poured into his financial freedom accounts. He set up accounts that immediately took the money from his income before he could even see it, and deployed it into secret savings accounts that he would use for his investments. This left him with no choices but to find a way to make ends meet.
I love this approach because I feel that it forces you to be smart and resourceful when it comes to the amount of money you spend on your daily expenses. When you leave yourself practically short at the end of the month, you think twice before you throw out leftovers or buy a slice of pizza on the way home from the gym.
I’m not saying that I always want to be that tight with money, but it’s building character in my life. My relationship with money has changed so much in the past year, and I am thankful that I am going through this. I will appreciate it even more when I am in a position to retire before 40 and spend more time with my wife and kids as my wealth continues to grow.
I’ve traded my time for money for too long, and now I’m focused on trying to make money while I sleep. Every time I think about buying something out of impulse, my mind calculates how much further that purchase pushes me away from the date that I can become financially free. Because the way I see it, every time I consume more than I have to, I add time to my financial freedom countdown and push myself further away from achieving my goals.
For those of you who want to explore the theory of staying broke and building wealth more, check out one of my favourite reads of the past few months, “The Power of Broke” by Daymond John. This book transformed my mind and ideas about how creativity can be spawned from a lean and frugal mindset.