Happy weekend everyone. As you take a much-deserved reprieve from work, here's some financial food for thought to help you make sense of why you work so much.
Rich…it seems to be something we universally agree is desirable and something we all strive for. But what is rich?
Ask a random person on the street, and you'll likely get something along the lines of 'rich is being able to buy a big house, a fancy car, take lavish vacations…basically being able to buy whatever you want!'
The challenge with the common definition of rich, however, is that it's inherently vague, varies from person to person, and isn't actionable.
In comes the concept of Living A Rich Life…
It's a concept I got from Ramit Sethi, author of the best-seller I Will Teach You To Be Rich. The general concept here is to better define what 'being rich' is for you, to make 'rich' more concrete, and ultimately, to quantify what you actually need to get there.
By defining our “rich life”, we transcend mere accumulation and instead focus on the elements of life that are important to us and bring us happiness. "Getting a million dollars" isn't the goal. The goal is to identify the things you love and structuring your life and finances in such a way as to allow you to do those things.
Life comes with tradeoffs. Want to make a million dollars a year? It will likely come with a greater time commitment and more stress. If that works for you, awesome! But if your ideal life is being able to travel a ton, or spend more time with family and friends, then maybe that job pays well but throws the rest of your life out of balance. Perhaps a job with less pay and more flexibility could work better for you.
The exact example doesn't matter. The point is that simply making more money isn't the answer. The point is to clearly define your “rich life” and then figure out what resources you need to make it a reality.
To help you get started funding your rich life, a concept I love is the idea of a conscious spending plan vs a budget. Here's a quote on it from Ramit:
"The problem with budgets is they make you look back on your spending to make changes. What really happens is you look back and feel horrible. And you do that the next month and then the next month after that. What you should do instead is look forward not backward.
This is a strategy we call “Conscious Spending.” Notice how it’s conscious spending, not saving. The thought behind this is all about positive spending habits, not banning yourself from spending altogether. So, put down the budgeting spreadsheet or app you launch every couple of months and forget about it."
(Source) https://www.iwillteachyoutoberich.com/blog/conscious-spending-basics/
The basic idea is this:
You work HARD for your money. And you need to work for more than just survival…you also need to ENJOY YOUR LIFE!
Identify elements of your IDEAL LIFE, be it travel, clothes, free time, food, dream home, expensive coffee, whatever it may be. Conversely, identify the elements of your life that are NOT IMPORTANT to you. Maybe you don't care what kind of car you drive, so get something cheap!
Categorize your current spending. Basic elements are your living expenses, investments, and savings. But also within your spending, have a piece that is allotted for GUILT FREE SPENDING! This should be an explicit part of your spending plan that you allocate to spend on things you enjoy without any guilt or worry.
Once you've identified what's important to you and what's not, you can structure your life and your resources around funding your “rich life”. Mercilessly cut costs in areas of your life that aren't important to you, and splurge guilt free on the areas that matter to you.
In summary:
We all have a different definition of rich. Defining what rich means to you is important - what would does your rich life look like?
Once you've defined your rich life, structure your life and resources to focus on what's important to you and cut those that are not. A good first step is to develop a plan that covers your needs but also makes room for guilt free spending on elements of your rich life.
If you want to learn more about living your “rich life”, Ramit's website has a treasure trove of free resources to explore.