Kids. So immeasurably priceless. Yet so insanely pricey. They might be our heart walking around in someone else’s body, but they sure do cost an arm and a leg too!
Financial freedom and independence is a top priority for most of us – in a recent Wonderful World Survey, 95% of members said exactly this. Yet for many of us, the promise of ‘financial freedom’ is a bit of a pipe dream. Especially in a world that is so insanely expensive – what does financial sanity even look like?
No matter who you are and what you earn, here’s a simple formula for Financial Sanity…
Earn more + spend less than you earn = stress less + give more + invest more
Let’s break it down…
Our income is not static. There are things we can do that push up our earnings. Things like getting a good education, and then getting further education or accreditation. Or diligently looking for work. Or finding a second job. Or starting your own business. Or making ourselves indispensable to our company. Or investing.
Spend less than you earn.
This sounds so simple, but this is precisely where most of us come undone. In a culture where credit is handed out as liberally, we tend to accumulate more than we can cope with. The result is that we don’t live within our means.
In a book called ‘The Millionaire Next Door’ the point is made that the most wealthy people don’t look very wealthy because they have become so disciplined at living within their means. They spend far less than what they have. Many wealthy people earned far less than some higher-earners, but eventually accumulated far more assets, precisely because they spent relatively less.
Robert Kiyosaki in ‘Rich Kid, Smart Kid’ defines financial intelligence not as how much you make, but how much you keep and what you do with what you keep.
So what happens when you earn more, and more importantly, spend less than you earn?
- You’ll stress less.
The more month left at the end of your money, the more days of your life you spend stressing. And our kids pay a price too. Ellen Galinsky of the Families and Work Institute asked 1000 children, ‘If you were granted one wish about your parents, what would it be?’ The parents predicted the kids would say ‘spending more time with them’. They were wrong. The kids’ number one wish? That their parents could be less tired and less stressed.
- You can give more.
I’m a big believer in the liberating power of generosity. Not only does it bless others and make me feel good, but it frees me from the tentacles of greed – giving money away is the surest sign that it’s not money that has me, but me that has money.
One of my kids recently had a birthday party and asked his friends and family for cash rather than presents. The result was his first-ever loaded wallet. He set aside one of his notes to give at church the next day, and then excitedly went with his dad to the Lego shop. For weeks, he’d paged through a Lego brochure – scheming which one he’d be able to buy. In the parking lot on his way in, he walked past a man selling really beat-up garden plants.
My husband declined to buy anything, but our boy tugged at his pants, and held up his wallet. “Daddy, let me buy those plants from that man.”
He then paid the man very generously for all his dying flowers. And when he got home later, it wasn’t the lego he’d just bought that he ran up to tell me about – it was those dodgy flowers. That’s true financial freedom.
- You can invest more.
Savings and investments are only possible when we actually have money left over to invest or save. Think of some of your income as seed and some as bread. By all means, eat the bread, but don’t eat the seed. Rather sow it into a long-term savings account, or some shares. As Einstein said, ‘The way to wealth is to get compound interest working for you, NOT against you.’ Investing means that we’re no longer working for our money, rather our money is finally working for us.
How about you?
Where is your financial life not matching up to this formula? What big or small changes could you make to get more financially sane and start making a few more cents too? Join the forum below and let us know.
Written by Julie Williams: Lifestyle Editor