We all know that to retire early, it helps to save your income. And we all know that it’s incredibly difficult to save your income. But what we might not know is just how much of our income is being spent frivolously.
Have you ever observed other people in the supermarket, what they put in their shopping cart? It turns out that many people are struggling to buy nutritious foods instead of biscuits, ready meals and other bad things.
What I see when I play Inspector Clouseau: snack foods, pretzel sticks, crisps, roasted peanuts, cured and smoked meats and sausages, bacon, salami, butter, cheese, canned soups, ready-broth, ready-made seasoning sauces, liquid seasoning like Maggi and stuff like fondue, French fries, frozen pizzas, bread, rolls, and more.
Why not oatmeal, brown rice and beans? Why not salads, fresh vegetables and fruits? I believe that when shopping people are overwhelmed by their empty stomach.
I would say, I’m economical when shopping. Nevertheless, I feed myself healthy. I buy fruits and vegetables in the discounter. Rarely organic goods. I sometimes buy from the local farmer at the weekly market. I buy cheap foods and goods. I rarely throw away food.
I buy ugly fruits and vegetables, so I get great deals. There are many people who buy bad, but they could make it cheap and healthy.
People get heart attacks at the age of 53 or even earlier. It is the most common cause of death of all. With a healthy diet, you can reduce the risk. The recommendation is a balanced diet with fresh fruits and vegetables, some fish, no red or processed meat, valuable oils (rapeseed, walnut, olive oil), whole grains, legumes, nuts. Strictly you should avoid sugar and white flour. Also, you should avoid excess of salt.
I try to limit my restaurant visits as much as possible and try to cook at home. You’ll be surprised how much oil, butter, salt is in your restaurant food.
Try to include more vegetables in your diet and limit the portions. Above all, eat lots of greens. Or drink fresh smoothies. They taste deliciously.
Live below your circumstances
How do you become financially free? You live below your circumstances. You save every month and invest your money in ETFs or stocks. You are working a lot. You pay attention to your expenses. I keep it low. I still live on a smaller living area than the average European who needs 46.5 square meters (per capita). I live on about 30 square meters.
Although I live in New York, I spend at most as much as an average household in Europe with $1,480 a month. My trick is: no car. Little furniture. Rarely new clothes. Used second-hand things.
If you want to make progress, you do not need to spend money like a madman for housing, car and food. If you understand that, then you got it. You look where you can save. Try to save 50 percent of your income, in that case you make giant steps tough wards financial freedom and a golden early retirement. If you switch to a direct insurance, with cheap insurance premiums you can save high commissions due to absurdly high administrative costs. Not to mention that many policies are unnecessary anyway, as you can never live without risk.
Getting to brass tacks
Let’s say you are 35 years old. You earn very well with a $90,000 gross income. Your effective savings rate is high. You have no consumer debt. Only for your house you have taken a mortgage. Is it a good decision to try to pay off the mortgage faster or just pay it off slowly? You do not really like the house you live in anymore. But you have to stay there because of the mortgage. You know that you can save a lot of money by taking advantage of the agreed special repayment option (5% per annum of the final balance). But you are afraid that other opportunities for investments will be lost. As your interest rate on the mortgage is 3.9 percent.
So, what to do? Make special repayment or buy stocks instead? There is no way to answer this question with certainty. If you pay your house earlier, this is a zero-risk bet, as it will give you a guaranteed 3.9 percent return. It’s up to you whether you want the guaranteed 3.9 percent or buy ETFs or stocks. It really is a question of your risk profile. I would make full use of the special repayment option for sure.
You can play through many simulations if you like, but the truth is, many things will come as a surprise:
Illness, family problems, accidents, early pregnancy, fraud, financial crisis, legal proceedings, fires, floods, storms, hail, global economic crisis, global stagnation, war, extreme economic success or others.
Prepare for the unknown
Forge plans that are adaptable and robust. Diversify your portfolio. Work a little as a freelancer to build different passive income streams. Start saving as soon as possible in your life. Think a little differently than the crowd. Look at life through the lens of financial freedom. The consuming loving mass just lives from salary to salary.
Do the opposite of the typical middle class: Strive to be completely debt free. Work hard. Save your income. If you buy a house, pay for it as soon as possible. If you want or need a car just buy it with cash only. Of course, enjoy some of life’s amenities. Enjoy life. Forget that you need stupid lifestyle stuff like a big car, expensive fashion and so on.
If you are young and newly wedded, do not compare yourself to other couples. Remember it is your life. Do not compare yourself with people who need show off expensive status symbols. Inferiority complexes are usually the reason why they have to show off. If you live more relaxed, this will help you: financially, as well as emotionally.
If you arrive in the middle of your life and you are healthy, satisfied, wealthy isn’t it a path worth taking. Again, if you are 20 years old, do not compare yourself with someone who is 30, 40, 50, 60 years old who chose another way for his life. Be on your own journey. Do not be distracted by people who might be dissatisfied with their life because they took on more as they could handle.
If you work part-time, you should be ready to cut back on your expenses to save your income, if necessary. You have hobbies that help you save your income or even bring you money. Maybe renovations can be a fun way to improve your living conditions as well. You buy a small shabby apartment and renovate it to turn it into a lifestyle accommodation by doing it yourself. Maybe you write a successful niche blog. Today the workplace is not so safe, and people don’t work in one and the same job for a lifetime anymore as our grand-parents did in the past. Therefore, you should build many different sources of income streams to avoid total failure. In short, be flexible, stay motivated.
If you have saved $250,000 or $300,000 of assets together, you may migrate to a cheaper living cost country like the Philippines, Panama or Costa Rica and live a more conscious lifestyle financially free.
What is your life plan and how do you see your future on our planet? Feel free to share your opinion with the community here in the comment box below. Thank you in advance.