For most of my life I wasn't very good with money. I made it and I spent it, the money came in and ,out and since nearly eight out of ten Americans live paycheck to paycheck.
I'm guessing that's something that you can relate to as well. After four years of college I left with a degree in mass communications and 97 thousand dollars in student loan debt. Then I bought a brand new car.
I told you I wasn't very good with money.
There was something holding me back from even looking at my personal finances. It had become a joke. I owe some money. What kind of money? I had dug myself into a hole so deep it didn't even seem possible that I'd ever get out. The crazy part? All that debt wasn't stopping me from spending. After I got the new car I added a new TV, Computer and even a leather jacket to my running tab.
That leather jacket was pretty cool though soon after college, though I came to the realization that I needed to make a change. That I couldn't just pretend like I wasn't in massive trouble.
It was one of the most challenging things that I've ever done in my entire life. But over the course of 4 years I was able to pay off every single student loan-even that car payment-and that's what I want to talk about today.
Money, our problems with it, and how minimalism has helped me there's a basic formula to win at personal finance and it's this:
Spend less money than you make.
In practice though, it's not that easy. Money seems to completely slip through our fingers. No matter how much money we make our bank account seems to have a completely different agenda.
One of the reasons that we're bad with money is because money is taboo. We can't even talk about it with coworkers, with family members, without people feeling judged or downright offended. We can only improve if we start to have honest conversations about money.
We need to remove our egos and actually try to learn. One of the best ways that I've found to learn about personal finance is through books and I'll give three recommendations.
1. Dave Ramsey's Total Money Makeover
2. Ramita Sadie's I will Teach you to be Rich
3. Tony Robbins' Unshakable
All three of these books lay out great, trusted advice that has worked and I think that you'll find a lot of value from them. Don't fall into the trap of lifestyle creep whenever we get a pay raise or we start to make a little bit more money.
The first thing that we want to do is upgrade our apartment buy a better car; increase our lifestyle. So we're in some way rewarding this win. But if we were instead to be more mindful about our spending.. if we were to keep our lifestyle in check and not inflate it as our income rises. 5, 10 years down the road we're gonna be able to live a lot more comfortably and we're gonna have so much more security than if we continue to increase our lifestyle every year.
We buy a ton of shit and we convince ourselves in a lot of sneaky ways why we deserve it. I mean I like shopping. Advertising is bad but a lot of it is driven to make us feel as if we deserve the indulgence you've worked so hard for. You deserve this handbag, these sneakers or this watch and the truth of the matter is that what you deserve is to be debt-free.
You deserve not living paycheck to paycheck.
We face pressure from social media. It can be very tempting to want to keep up and have the things that everybody else has, otherwise we'll have the fear of missing out.
But here's the thing. Rich people are rich because they make smart decisions with their money, they don't go out and lease a brand new BMW. They don't rent an apartment that they can't afford.
There's this thing called the myth of 'I don't have' and it's something that we tell ourselves to convince us that we need to go out and buy that thing. So as a filmmaker, you might say I really want to make that film or that video but I don't have this lens or I don't have this camera so I can't do it or I can't go out for that run or that jog I can't start my new workout routine because I don't have that pair of sneakers but really the only thing that's doing is procrastinating us from getting started with our goals and our dreams and t's convincing us that buying that extra thing is gonna solve everything which it won't. You need to make sacrifices.
To get to a point when I could start to take risks, you have to be completely clear with why you're doing this in the first place.
Why do you want to be debt-free?
Why do you want to have?
When we truly understand why we don't want to be living paycheck to paycheck—why we would want to be debt-free—everything else comes a little bit easier. When we think about having the security and safety being able to take care of our family and our friends if they run into trouble it becomes more obvious why this is so important.
You're then able to take more risks to challenge yourself. Push yourself outside of your comfort zone in ways that you otherwise wouldn't be able to.
If I didn't take in that first step and realize that I had a problem I wouldn't have had that domino effect that led me to where I am. To be able to take pretty ambitious and risky decisions to move across the country, to leave my business and start a completely new one. These aren't easy decisions and when you have debt it's gonna be that much more difficult and less likely that you're gonna succeed.
The strategy couldn't be more simple.
Spend less money than you make.
But as you know we face a lot of pressure to do the exact opposite. But if you can outmanoeuvre these forces, if you can build a healthy relationship with money, and create positive habits that stick you will be able to become financially free.
I'd love to hear about your success stories as well as a part of that conversation opening up the dialogue about money. I think we should be encouraging each other and really rewarding each other for making positive steps in our lives try not to feel threatened or discouraged if other people have a great success story. See it as potential in yourself.
If somebody is able to get out of debt that means that you probably can too.
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