What do you dream of?
Traveling? Buying a home? Staying home with your kids? Taking time off? Sending your kid to college? Retiring someday or even early? Buying a camper and heading for the open road?
Don’t know what your dream is? Read this and figure it out!
Unfortunately, few dreams are free. If you want to pursue your dream, you’ll probably need to save some money.
It may seem really hard to eek out savings from each paycheck.
But I promise it will only get easier!
As long as you’re not spending more than you make, you don’t even have to reduce your spending. IF you’re spending more than you make, sorry, but you have to get yourself on track. Cut, cut, cut and earn, earn, earn until you’re not living beyond your means.
You just need to commit to keep your spending where it is.
Earned a raise? Put it in your dream fund.
Earned a bonus? Put it in your dream fund.
Received a cost of living adjustment? Put half of it in your dream fund.
Earned extra money from a side hustle? Put it in your dream fund.
You don’t HAVE to increase your spending just because you’re making more money.
You don’t HAVE to increase your spending just because inflation has gone up.
Sure, some of your bills will go up as inflation rises, but not all costs need to rise.
Think this is impossible? I’m here to show you how possible it is.
I compared my spending in 1996 to my spending in 2015–the last full year I worked. From age 30 to age 50, my annual spending went down over $3,000.
Even when I take out 1995’s house and car payments*, my spending went up only $6,400 in 20 years.
My personal inflation rate over 20 years was 34% or 1.5% a year.
The government says inflation in my state was up 57% or 2.3% a year though I believe in my resort locale, it was even higher.
My earnings went up 122% or about 4% a year.
Keeping my personal inflation rate below the real inflation rate and far less than my earnings were growing allowed me to retire early.
And I promise, I was not suffering!
During these 20 years, I bought a new car and a new boat, we built our dream home and bought a vacation home . . . all for cash.
You’ll be amazed at what you can accomplish just by keeping your personal inflation rate low.
So right now, commit to doing this for me (and for you!):
Immediately increase your retirement contributions by at least half of any cost of living increase–before you even get that first paycheck. Out of sight, out of mind–done.
Put most of your bonuses, raises and side hustle income in your dream fund. If retirement is your dream, put it into your tax deferred account like a 401k or IRA.
Put the money you’re saving for the long-term (over 10 years) into a low fee, broadly diversified index fund like Vanguard’s VTSAX (my favorite fund). Learn a bit about investing–this education will serve you well.
Then just sit back and watch your dream fund grow! You CAN do this!
Investing is risky, this reflects my opinion and is for informational purposes only. Proceed with caution, do your research and seek professional advice if necessary.
* In 1996, I had a mortgage and Mr. Ms. Liz loaned me money for my car (interest free baby!). In 2015, I had no debt.