Updated: February 7, 2020
A lot of people believe that if you want to have a secure financial future, then you have to sacrifice living a good life today. That instead of enjoying your salary and spending your money now, you need to save and invest, and live frugally.
That is not entirely true. Because enjoying life today while securing your financial future is possible, if you know how to properly balance your spending and saving.
Of course, the first real step in achieving that balance is to live below your means. Simply, do not spend more than what you’re earning.
It is never easy, but it is possible — as proven by the countless people I’ve met who have done exactly that. And you can do it too.
Spend less than what you earn
Know exactly how much you’re earning. Decide how much of it you’ll save and invest monthly, and then create a budget for your needs with what’s left.
This is what many financial advocates refer to as paying yourself first, where your Income less Savings equals your Expenses. And it is a great formula to follow if you want to become wealthy.
Find ways to increase your means
In most cases, the only way to live below your means is to adopt a frugal lifestyle. And I understand that it can be difficult, especially when you have family and friends who are big spenders.
My initial advice would be to avoid spending a lot of time with those kind of people. But I believe it is more effective to instead have the right attitude towards yourself if you want to stay on the track of your financial goals.
What I mean to say is that, realize that who you are is not defined by the things you own. And you are not less of a person if you don’t have branded clothes, or if you don’t have the latest gadgets.
However, you shouldn’t just accept your financial status and think that you could never afford such luxuries. Instead, challenge yourself to find ways to make more money, to build multiple sources of income.
You can do freelance work, create a business on the side, or even find part-time work. There are a lot of opportunities to earn extra cash nowadays, but you have to open your eyes to discover them.
Do the math
Once you’ve successfully done the two things above, then I’m quite sure you’ll begin to see your savings and investments grow. And you’ll start to worry less about your financial future.
Interestingly, when frugality becomes a habit, most would find it difficult to upgrade their lifestyle, even if they can afford it. The number one reason is fear that they’ll start spending too much and ruin their budget.
Again, the key is to find that balance between saving and spending. And one of the best strategies I’ve found to achieve that balance is to do the math.
Recently, a friend received a substantial increase on her salary and shared to me that she now plans to enroll in a gym — a lifestyle upgrade she’s been wanting to do for a long time now.
However, I asked her if she can do a cashflow analysis first. Because the monthly fee she’ll pay the gym is not the only expense she’ll incur if she decides to enroll.
By simulating on paper her planned change in lifestyle, she discovered that she’ll also have parking tickets, gym clothes, and additional laundry as further expenses.
When she took into account those things, she realized that her salary increase won’t be enough to cover everything. Nonetheless, because she has the habit of tracking her expenses, she was later able to identify areas on her budget that she can cut down to be able to afford the gym membership.
That’s the advantage of actively monitoring your income and expenses. It will certainly come in handy when you need to adjust your cashflow and upgrade your lifestyle in the future.
Upgrade towards comfort and meaning
If there’s one final advice that I want to give when it comes to upgrading your lifestyle, then it would be to prioritize making your life more comfortable and giving it more meaning.
When you can afford more, instead of immediately thinking of what to buy or where to spend your money on, take some time to ask yourself these questions:
- How can I make my life more comfortable now?
- What can give my life better meaning right now?
My friend’s decision to enroll in the gym is not simply for health reasons. It is also for convenience and comfort because she can now stop running inside her village at night after coming home from work.
Moreover, she’s always wanted to learn how to dance. That’s why she’s looking forward to joining the dance exercise classes at the gym. Plus, being an extrovert, she’s also excited to meet new friends there.
My friend could have chosen to travel more often, increase her wardrobe collection, or maybe find a larger apartment to live in. But she chose to upgrade her lifestyle by enrolling in a gym.
For her, that’s the choice that made the most sense, because it’s an upgrade towards making her life more comfortable and more meaningful.
As all of us are different, the answers to those two questions would certainly vary. But I’ve discovered that by making those your primary considerations, the choice of where and how to upgrade becomes easier.