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Get Out Of Debt: Start Acting Wealthy

06.03.2010 by Matt Jabs //

Act wealthy to get out of debt

What?  Act wealthy to get out of debt?  Yes, precisely – and if you’ve misconstrued what I’ve said then you’re probably in debt for a very good reason, so read on.  🙂

How will acting wealthy get you out of debt?  Studies and experience in personal finance have learned me a very valuable lesson – if you want to get out of debt, you must put an end to frivolous spending – which is our basic definition of acting wealthy.  Remember, most wealthy people are well-to-do for a very good reason… Acting wealthy = no frivolous spending.

Consider the following example by JD Roth, my friend and author of Your Money:  The Missing Manual

In a recent article JD judges a friend who, despite a recent bankruptcy, continues to swim in the pool of bad financial choices.  Although JD’s frustration toward his friend was spot on, it was actually a side note of the article that caught my attention.

While pointing out the mote in his friends eye, JD does not fail to recognize the beam in his own – and the details of the beam was the inspiration for this article.

Get of out debt by acting like John M.

John M. is JD’s millionaire next door neighbor, and on a recent 10 day cruise to Alaska… well here, JD tells it best:

As I began to silently judge Michael’s choices (JD’s friend,) I thought of my recent trip to Alaska. I spent ten days on the boat with my neighbor, the “real millionaire next door“, and in those ten days I often felt like I was being judged.

  • Before the trip, I bought a $120 backpack at REI. My goal is to use this for much of my travel during the coming years. It fits in an overhead compartment, and is a great way to limit what I carry. John frowned when he saw the new pack and asked, “What’s wrong with a duffel bag from Goodwill?”
  • On the first day, Mac and I tore a paper towel in half, and we each used our half as a napkin for several days. Eventually my napkin became grimy and gross, so I went to tear off another half a paper towel. When John saw me, he scolded me and told me I ought to use a cloth towel instead.
  • Near the end of the trip, I threw a molding orange overboard. “I wish you hadn’t done that,” John said. “I could have cut out the bad part and eaten the rest.”
  • On the last day, I went to the bookstore in Sitka and bought a copy of Bruce Chatwin’s In Patagonia, which I’ve been wanting to read for a long time. (After our trip to France and Italy this year, Kris and I hope to save for a trip to Argentina and Chile in 2012 or 2013.) When John saw I’d bought a new book, he shook his head. “I’ve got a lot of perfectly good books here on board,” he said, indicating his library of old paperbacks.

Throughout the trip, I felt like I was under pressure to, well, be more frugal, to make the same choices John would make. And you know what? That pressure sucked. It felt awful. I didn’t like the feeling of being judged, especially by somebody I look up to.

Get out of debt by curtailing your spending

Can you tell what inspired me?  What did you think of JD’s neighbor?  He’s a millionaire yet he shops at Goodwill and eats the good parts of bad fruit.  That’s why he’s wealthy.  The majority of wealthy people spend far less frivolously than the majority of those enslaved by debt, and John is no exception.  Sure, as JD mentions, too much of a good thing can drive a patient man mad; but regardless, what John preaches is correct – and even if you don’t like it, it makes you think – and thinking is good.

Stop spending, cut your standard of living, start saving

Being wealthy is simple.  All you have to do is spend less than you earn and give generously.  As long as you sail that ship, how much you earn becomes nothing more than a variable in a personal finance equation that always ends up in the black.

Need some help? Follow JD’s lead and surround yourself with people who motivate you to succeed… even if they do annoy you every once in awhile.  🙂

Categories // Debt Tags // Debt, mindset, wealth

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

05.14.2009 by Matt Jabs //

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.

Categories // Counsel, Debt, Expenses, Investing, Spending Tags // interest, mindset, philosophy, sacrifice, Savings, wealth

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Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

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Disclaimer

Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

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