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All too often, people allow their finances to drive their life. When you are living paycheck to paycheck, it can be hard to envision a life where you are financially secure. With approximately 63% of the US living paycheck to paycheck, it is hard to envision anything else. The challenge is that making more money will not automatically fix things, as 49% of people making over six figures are still struggling. The bottom line is that your happiness with money is more about your mindset and behaviors than the numbers themselves.
Rent and Ramen
When you are just making enough to pay for rent and ramen, times are tough. You only have two choices, find cheaper rent, or make more money. If you feel stuck in the rent and ramen phase, it is time to ask for help. Go to your local workforce development board (often in the unemployment office) and see what they have for free training. Workforce development programs are developed to build in-demand careers, and also include job placement assistance. If you need to move for a lower rent, check out https://makemymove.com as communities are willing to pay you to move there.
Past Rent and Ramen
For those of us, myself included, who struggled through the rent and ramen phase, it often hurts our money mindset. When you grew up poor, broke, or whatever you want to call it, it is hard to get out of a scarcity mindset. I’ve worked with people who are millionaires and still have a scarcity mindset from their early years. With a scarcity mindset, you are so worried about making ends meet that you end up stuck on the gerbil wheel of life, running faster each day and getting nowhere.
The first step in shifting your mindset is to be aware of where you came from and where you want to go. Acknowledge the progress you have made, but don’t let it hold you back.
Start with life first, then finances.
What do you want to do with your life? I know that is a big question, probably the biggest one, but it is one many overlook. Many adults are following the standard LifeScript and do not even realize it. The standard LifeScript says that you go to school, get a job, get married, buy a house, have kids, retire, and so on… This LifeScript is so ingrained in us that many people get to a point in their life and realize that they don’t even know how they got there. Instead of just following the path ahead of us, we need to pick a path, set goals, and go for them.
You get to choose wherever you want to follow or deviate from the LifeScript. I work with Childfree people who don’t have kids and aren’t planning on having kids. Childfree people make up about 20% of the US and have chosen a completely different script (or no script at all). It is not a better or worse choice, and for some people, it wasn’t even a choice, but they are living a different life. The challenge is that most, if not all, standard financial advice out there assumes you have kids, or will have kids, and it just does not fit.
How do you want your life to be different? Do you want to follow your passions and open that cupcake shop you always wanted? Do you want to be a nomad and live in a different place each month? Do you want to go back to school and do something different?
The key is to ‘Marie Kondo’ your life and figure out what brings you joy. It is very rare to hear that someone gets true joy from their job. If you don’t get joy from your job, why do you do it? Chances are you keep doing the job you don’t love because of your burn rate financially. You need to keep running the gerbil wheel to keep up with your expenses. What if, instead, you downsized and focused on what is important to you?
The challenge is that online, you will find all of these guides saying that by 40, you have to have a certain amount in the bank or some other silly measure. While benchmarks can be helpful, the only one that truly matters is if you are making progress towards the goals that you set.
Do you really want to retire? With my Childfree clients, I’m finding that they would rather live a FILE (Financial Independence, Live Early) lifestyle than a goal of FIRE (Financial Independence, Retire Early). If FIRE is an on/off switch for work, FILE is a dimmer switch that reflects picking the right work at the right amount and right time for your life. It is a different way of living but focuses on increasing joy now. It is not a YOLO approach to life, but an intentional plan to invest in yourself and what matters.
While I may not be able to give you your life purpose in this article, I can help you set a good financial foundation to create a safe space to grow. I know it is boring, but start with the basics, and then financial independence will be right around the corner:
- Get on a budget (doesn’t matter which one, just get a budget)
- Get out of debt (ignore the concept of ‘good’ and ‘bad’ debt, that is just marketing)
- Save 3-6 months of expenses for an emergency fund
- Take time to figure out what you really want (consider a sabbatical or other life change)
- With your goals in mind, create a financial plan that will get you there.
Your financial plan needs to reflect you. Once you figure out what life you want to live, you can make the changes needed to get there. That may include job changes, downsizing your house, traveling, or a variety of other things that people may consider odd. You get to choose when you step off the gerbil wheel of finance and start living your life, why not do it now?