Before you move on to the next post, this post is not about limiting you but growing you. When I think about the life I want to live, I think about the freedom I want to have (especially in my older days when I don’t have that much energy left). Freedom means the ability to do what I want instead of the need to do what I have to do. It’s not easy to obtain this level of freedom. It requires planning and sacrifices along the way.
The idea of 50% lifestyle is threefold:
- It pushes you to live below your mean (Aim to live on half of your income and invest the other half).
- It helps you stay focus (as your income increase, your expenses stay modest)
- It builds character and healthy money management habits (this will be very important during retirement years when you are on a fixed income and can’t afford wasteful spending).
LIVING BELOW YOUR MEANS
People say you only live once, so you need to enjoy it to the maximum. I don’t agree with that! My purpose on this earth is not just about me; it’s bigger than that. I think about the next generation and how I can be of assistance to them. Don’t get me wrong; I don’t want you to sacrifice everything for everyone and nothing for yourself. You need to help yourself first before you can help anyone else.
But I also don’t think you should consume/exhaust all the wealth you have built before you die. Living below your means allows you to save, invest and eventually build wealth. You can’t win with money if you spend everything you earn. This habit will be the key to your financial success.
STAYING FOCUSED ON YOUR GOALS
Modesty is the name of the game. Modesty will keep you grounded. I don’t know about you, but I would not want to live in a never-ending cycle of increasing needs. More is not always better. Sometimes more things open the doors to greed and craving that can be hard to fulfill. Knowing when to say no to your extravaganza wants creates discipline, which in return will save you money and headache.
I heard people say: “I have expensive tastes”; that is your choice! Your body will get used to the things you give it. Your brain will sometimes trick you into thinking that you NEED something when you just WANT to have it. Depending on what works for you, you can set up a budget or make sure you have no money to spend by saving/investing first (I do the latter just because budget and I are not friends).
BUILDING HEALTHY HABITS
One of the most irresponsible things you can do is not to learn from your mistakes. Listen, we all have messed up financially at some point in our past. THAT IS OKAY! What is not okay is pretending that it did not happen and failing to gain wisdom from it. Science states that it takes 21 days to build a new habit and a lifetime to practice it. Learning all these money principles when you are young is critical because you still have time to perfect them. You can come back from any money mistakes you make when you are twenty but, the same is not true when you’re fifty.
These healthy habits will help you when your income goes down, when you’re making big financial decisions, or when you are unable to work. I know I said to start young, but better late than never. If you are getting started, don’t feel discouraged (we all had to start somewhere).
LET’S MAKE IT PRACTICAL
My ultimate goal is to live off 50% of what I make and invest 50%. I understand it will be a challenge but, I’m up for it. If I can’t increase my income, I need to cut down on expenses; whatever I need to do to get there.
I started applying this principle about three years ago. Salary increases, bonuses, and side hustle income go to investing and paying off the mortgage.
Once I reach the “magic number”; I can then work half time (50%). The magic number is different for every person. The 4% rule states that If you withdraw 4% of your investment each year (adjusted for inflation), your investment should last a long time. If your annual living expense is $50K then, you need $1.25M in your investment account to retire. The lower your annual living expenses are, the less money you will need in retirement.
CONCLUSION
I hope you realize by now that the 50% lifestyle doesn’t mean half-living but living at half cost.
Looking for a way to enjoy life doesn’t have to be expensive. The decisions you make today will impact your future and legacy. What do you want to leave behind? Give yourself a gift of freedom so you won’t have to worry in your golden years. It will be even better if you could manage to be a blessing for the loved one (alive or when you pass away). Don’t let society tell you how to live your life. More importantly, don’t let broke people give you money advice.
“If you want to transition from your lower self to your higher self, a sacrifice is demanded. Everything has a cost. The greatest things have the greatest cost. Most people will never pay the price, hence they never become great.” Unknown
