Let’s assume you’ve already dealt with the most important parts of your finances: your credit cards, bank accounts, expenses, and investments. You’ve consciously chosen what your rich life is, and you’ve built a financial system that essentially runs on autopilot, allowing you to spend your time doing the things you love. You are doing great. Especially when you consider that most people are still struggling to pay their monthly bills. So congratulations. But – of course there is a “but” – if you are seriously nerdy and want to know more about improving your finances, this is for you. But remember: this is extra credit, so don’t feel obligated to follow the advice here unless you really want to.
Be honest about why you want more
I was raised to be the best – to study harder, work longer and perform better than everyone else. In many ways, those lessons have paid off. But I also see the dark side of blindly following the idea of being the best without thinking about why you work so hard. So before you read on, ask yourself what the point of all this work is. Do you want to earn an additional $10,000? Or to actually live a rich life?
Sometimes financial advice just blindly encourages people to do “more, more, more” without stopping and asking, “Is that enough?” The concept of winning becomes the goal instead of knowing why you’re playing in the first place. When can you stop and enjoy all the hard work you’ve put in?
I’ve seen too many people decide to take control of their finances (good), then change their lives to save money (good), then keep saving and become more aggressive (not so good), and finally ” in the spreadsheet” where they spend each day counting how much their money has grown (very bad). They’ve become obsessed with the game without knowing why they’re playing it.
You don’t want to live in the table. There is more to life than just optimizing your asset allocation and running Monte Carlo simulations on your investments.
How it goes on
Now it’s time to ask why you want to keep going. If the answer is, “I want to take a lavish vacation and splurge on premium tickets every year,” great! If your answer is, “I’m saving massively for the next three years so we can afford to move to our dream neighborhood,” great. I can show you how to achieve both of these goals even faster.
To do this, let’s go through an exercise I call “Bringing it from the clouds to the streets.” When I ask you, “Why do you want more?” The usual answers are “freedom” or “security.” That’s fine, but I want to challenge you to go deeper. The problem is that high-level, vague visions never motivate us in the way we hope. True motivation is often real, concrete—on the street. It’s something that affects our daily lives.
If you had to be very specific about why you want to make your next $10,000 and you had to get your answer out of the clouds and onto the street, what would you say?
What is your street level motivation? You could create a lofty purpose in life—or you could take a 10-minute walk and find what excites you in that very moment. The answers are often much simpler than you think.
Your motivation could be catching a cab for happy hour at 5pm instead of breaking a sweat on the train, or paying for a friend to join you on a glamping trip. One of my early street level motivations was being able to order appetizers when I ate out!
Why do you want to make the next $1,000 or $10,000 or $25,000? Don’t worry about an answer that’s in the clouds. Be brutally honest and get your answer out on the street.
When it’s clear to you why you want more, let me show you a few things you can do to make it happen.
Two of my favorite things to do are concerts and coaching high school lacrosse. With my job and salary, I am able to purchase VIP tickets to concerts and have the flexibility to have a full-time job in addition to coaching high school lacrosse.
– DANIEL SNOW, 38
When I go shopping, I don’t look at the prices of things. I get what I need and want. I used to have to figure out how to make $50 a week work. If a recipe calls for a pound of Gruyère, I’ll take it. I might be surprised at the registration but it’s all good. I don’t have to take anything back.
—ELZ JONES, 44
How to accumulate more and grow faster: Feed your system
The automated system is great, but it’s only powered by one thing: the money you feed it. That means your system is only as strong as the amount you put into it.
This is where your purpose comes in. For example, if you want to FIRE (become financially independent and retire early) in fifteen years, you know you need to double your money and save/invest aggressively. Alternatively, if you want to live big in Manhattan, you could give yourself a generous spending plan on cocktail bars and seamless delivery (a decision I know well).
Of course, the very best way is to say “yes and yes” — yes, I want to save aggressively, and yes, I want to live an incredibly wealthy life. With enough planning (and, depending on your goal, a high enough income) you can often do both.
Remember: Since the rewards of investing as early as possible are so enormous, one of your key drivers will be feeding as much into your system as possible.
I automated my savings so I saved a significant amount while paying off credit card debt. That allowed me to pay for a wedding and also buy a house at the end of the market in San Diego. My home has gone from $250,000 to $700,000 in value, and the absurdly low mortgage payment allows us to live in a popular, beautiful neighborhood with relatively little stress.
– ALISSA MCQUESTION, 34
In other words, if you could find a magic money machine that took in $1 and paid out $5, what would you do? You would put as much into it as possible! The only catch is that it takes time: every dollar you invest today will be worth a lot more tomorrow.
how rich will i be . .
Assuming an 8 percent return, how much is your monthly investment worth?
WHEN YOU INVEST. . .
Amount $100 per month $500 per month After 5 years $7,347 $36,738 After 10 years $18,294 $91,473 After 25 years $95,102 $475,513 Note: For simplicity, this calculation ignores taxes.
But don’t just take it from me. Go to bankrate.com and open one of their investment calculators. Enter your monthly investment contribution assuming a return of 8 percent. You’ll probably find that your current posts are growing slower than you thought. But if you add a small amount each month — even $100 or $200 more — the numbers will change dramatically.
I outlined a conscious spending plan that suggested general percentages of income to use for saving and investing. Her first goal was to target those percentages. Now is the time to move beyond those amounts so you can save and invest as much as possible. I know, I know. “Invest more? I can’t squeeze out a cent more!”
It’s not that I want to rob you. On the contrary, because compounding works so effectively, the more you save now, the more you’ll have later (immense). You saw this in the Bank Interest Calculator. Jump in now and play around with your conscious spending plan to see how you can squeeze a little more out of your investments each month.
Optimizing your plan can involve some serious negotiation when making major purchases like a car or house. Or you need to cut your spending as ruthlessly as possible, which I cover here. You may even consider negotiating a higher salary or getting a better-paying job. No matter what you do, make sure you’re shoveling the maximum amount into your system each month. Remember, it’s never been easier than now – and the more you put into your system now, the sooner you’ll reach your goals.
I went from paying my bills manually every month to paying my bills automatically, automating savings and budgeting for spending throughout the year. Now I’ve even automated monthly donations to charity. I almost never worry about money now, and having grown up fighting the constant struggle with money, it really does make me feel a lot better.
— MICHAEL STEELE, 40
