Financial Philosophy & Sacrifice to Create Wealth & Live Off Your Interest

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Do you have a Financial Philosophy?  How much are you willing sacrifice to become debt free?

Over the course of the last week or so I have drawn several noteworthy conclusions about myself, my life, my family, and my financial goals.  When I say “family” I am referring to my wife & I.  Currently it is just the two of us, but I still consider us a family.

I recently discovered that my financial mindset was faulty, in several distinct ways.  This faulty mindset is not something I will look to blame on anyone, rather it is a mindset that is shared by a vast majority of middle class folks such as myself.  Even since my financial awakening in January of 2009, I still had an errant view of finances.  Here are the 2 distinct problems with my previous thought process:

  1. I thought the best financial plan available to me was to save money I earned and pay cash for things.
  2. I did not have a financial philosophy.

Yes, you read that right, saving money I earned to pay cash for things is an errant financial though process.  Let me elaborate.

Saving Money To Buy Things is NOT the Best Option

While saving money to pay cash for your purchases is a wise decision, it is NOT the best financial decision.  What about saving your money in order to pay yourself?  How does that sound?  It may sound great to some, but may sound unrealistic or like somewhat of a foreign concept.

You may be thinking, “Yeah, that sounds great…if it were possible!”  I am here to tell you today friend…it is VERY possible.  It will take some time, but living off the interest of your own money is something wealthy people have been doing for many, many years!  Therein lies the difference between a wealthy mindset, and a middle class mindset.  I have now adopted the wealthy mindset and I urge you to do the same!

There are several things that you need to do before your money can start paying you back.

  1. Figure out how much your money is paying someone else – Go through all of your expenses and figure out your interest amount paid to others.  This will give you a painfully obvious & realistic overview of how much money your interest is already earning other people.  Now consider for a moment, if some or all of that money were going where it belongs…into your bank account.
  2. Work out a plan to reduce your debt so you can begin paying yourself – Sacrifice, sacrifice, sacrifice!  This is the key.  If you read over the archives of Debt Free Adventure you will notice a common theme; my wife & I are finding ways to sacrifice so we can attribute larger chunks of our money to debt repayment.  This, in turn, will cause less & less of our interest money to go toward paying others, and allow us to start saving it so it can begin paying us instead!  Here is one very specific example of how we are sacrificing by eating more beans instead of meat to save hundreds on our monthly grocery bill.
  3. Begin saving & investing your money – You do not have to save tons to watch it accumulate.  In the beginning you should attribute more of your funds to debt repayment, but make sure you save at least some of it.  Develop a plan, set savings goals, and automate the withdraws so you don’t have to think about it at all.  Here is a great article if you are overwhelmed by your present financial state that will help you put all of this into perspective.
  4. Patiently & faithfully stick to your plan – You are not going to be able to wake up tomorrow, quit your job, and begin living off your interest…so the sooner you lose this idea the better.  Realistically the entire process will take years, but is entirely necessary to build your financial strength and fortitude.  Waiting on the Lord and meditating on His Word is the best medicine for you.  Read Psalms & Proverbs to gain wisdom & patience.

Hopefully you are starting to see the pattern.  Sacrifice in order to pay down debt, develop your plan, and save your money, and trust in the Lord.  It may take awhile, but within a few years you will see a noticeable difference.  This is not going to happen overnight, nor should it.  It is good for you & your family to go through the process of getting your financial house in order.  It is also good for you to do so over a long period of time.  It will help build your character and will help establish & grow you financially, emotionally, and spiritually.

Develop your Financial Philosophy

Your financial philosophy can be as long or short as you like but should embody your overall financial goals and how you plan to achieve them.  I chose to establish a very short philosophy so I can easily tattoo it in my mind and incorporate it throughout my entire life.

  • “Sacrifice now to benefit later.

That’s it folks.  That is my entire financial philosophy in one short statement.  Use your imagination to expound the depth and breadth of it.

Take a good look at your overall financial state, where you would like to be, then develop your own philosophy to help you get there as soon as possible!

Concluding thoughts on sacrificing…

Jesus gave us the ultimate example when he sacrificed His own life to save ours!  It makes sense then that in order to save, we need to sacrifice.  What are you willing to give up in order to reach your goals?

I can become financially free much quicker if my wife & I choose to sacrifice more.  As you might expect, the greater we sacrifice, the sooner we will reach our goals.  Will it take us 30 years, 20 years, 10 years…how about 5 years?  It all depends on how far we are willing to go.

Most recently we have been discussing selling our home.  If we can sell it and avoid taking much of a loss, we will most likely do just that.  If we do sell, we plan to rent an apartment or condo for around $500/month.  That would save us over $900 on the mortgage, taxes, & insurance alone not to mention all of the money we would save on home maintenance.

We are also considering becoming a one car family.  I was recently in a car accident (I’m okay) which required my Jeep to be in the shop for the last few months.  Because of this experience we have learned that we can get by with only one vehicle.  It may seem impossible, but remember that you get used to where you are, no matter where you are.  If you have 5 cars, it will hard to imagine cutting back to 4.  If you have zero cars, you will find a way to get used to that as well.

I will expound on the latter points in new posts over the course of the next few weeks so be on the look out.

DFA is passionately dedicated to helping others break the bondage of debt using biblical principles.

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1 Alan @ Saving For Serenity

I struggle with this whole idea. I like it, in theory, but I have a couple of problems with it. First, I don’t want to have to sacrifice. Its just against my nature. Its something I think I could get over, but obviously that takes effort, and who wants to expend effort?

Second, and more importantly, I need to know how far to take it. I see no point in absolutely destroying myself in the pursuit of some potential future goal. What happens if you work really hard for 20 years, make HUGE sacrifices, and are just about to cross the threshold, and the market crashes, and you lose everything. Or you get into a car accident and are paralyzed. There’s so many variables for the future, how can you assume you’ll be alive and healthy enough to enjoy the money of the future?

Just something I’ve been thinking about…

2 DebtFREEk!

Great points Alan.

1. Your level of sacrifice will determine the speed with which you reach your goals, so you only have to sacrifice at a level you are comfortable with.

2. You cannot worry about preparing for unseen events in life that you have no control over. Simply set your goals, and work at your pace to achieve them.

What are your financial goals?

3 Michael Plesner

My struggle with the concept is determining the extend to which it is feasible. Can all people do this? What would happen if all people lived off financial interest?

You state that living off financial interest is “a wealthy man’s mindset”. But does it require a middle class who are willing to borrow? Will a move of the middle class toward zero borrowing not imply a lesser existence for those “wealthy people” living of the interest? Will there be a point to where it is simply not possible at all to gain any positive interest?

4 Matt Jabs

Hi Michael, from a philosophical viewpoint I can appreciate your comment but I think we both know what you lay out would never actually happen. I suppose the article is directed at the few who want to change their mindset… like me! 🙂

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