When it comes to building wealth having the right mindset and making sacrifices play a huge role. Since most young people have a buy fun stuff now, invest later mentality, both mindset and sacrifice fly out the window. And while having a wealth accumulating mindset and making necessary sacrifices are required to reach financial freedom they’re not always the easiest thing to do when you’re young and living your life.
What makes these easier to implement is prioritizing your finances. This means prioritizing where to spend your money so that it brings you the most bang for your buck (i.e. value, benefit, purpose, happiness, etc.) Most of us make enough to do or buy the things we like, but we probably don’t make enough to purchases everything that makes us happy. You might like going out to eat a few times a week, but do you enjoy eating out more than you hate working your boring office job? Or maybe you like buying the latest gadgets, does this temporary happiness mean more to you than the comfort of a big nest egg that’s growing in an investment account?
This is how the majority of people live. They sacrifice their freedom and what brings them the most happiness for crap items and experiences that only provide novelty. When you sit down to create or review your budget it is a good idea to think about how you’d like to prioritize your money. Do you hate your job and would like the freedom to do something you love that is at a lower pay? Then making it a priority to minimize your debts/living expenses and increasing your saving/investing over buying new clothes, toys, or aimless experiences will help get you there. If you love your job and want to spend your free time doing fun activities then perhaps you allocate a little more to the travel/experiences category of your budget than the person who doesn’t like their current work.
I want to one day (very soon) only have to work a job I enjoy part time so that I can spend the better parts of my day outdoors with my family and being of service to others. By the time I get home from my office job I’m so mentally burned out from counting down the minutes that the people I love get the leftovers of my energy. Forget that. I want my work to energize me so that I can give the best of myself to who and what matters most to me instead of towards earning a paycheck. Writing these posts and helping other young people get out of debt and get their finances in order is life giving to me. Trying to stretch out four hours of office work to an eight hour day because your boss would rather you be there all day than efficient is life draining. I’m not saying you always have to work a job you love to pay the bills, but if you had the opportunity to focus your time and energy towards something you enjoy rather than a job you at best tolerate, then why wouldn’t you?
Essentially, freedom is my financial priority. To reflect this priority my family’s budget focuses heavily on investing and paying down our mortgage. We buy whole foods that I cook at home, and we aim to do activities together that are free so that in a few years I will be able to be home more. We eat good food and spend quality time together and because we have a goal we are shooting for we can easily assess what purchases will take us closer or further away from our goal.
Don’t be like most people who don’t have priorities and who buy shiny new things for a temporary hit of dopamine. These people will always have a difficult time accumulating wealth and will struggle in reaching their financial goals. There is way more to life than money, but it is a resource that we need to use wisely so that we can get the most out of our lives. You cannot be free to be who God made you to be, to do your work, and to be a service to others if you’re shackled by debt and impulse buying. Time is also a resource, but since you’re working 40 plus hours a week to pay for crap you don’t need, and probably deep down don’t really want, it becomes a very limited resource.
Regardless of what your main priority is, a focus on giving, eliminating debt, maintaining an emergency fund, and investing are all great places to put your money. Depending on your current financial situation these amounts will vary, but it’s a good rule that you allocate a portion of your budget for those four categories.
Next time you sit down to review your budget, or even before you spend your next dollar, really think about what matters most to you in life. Where do you want your money to go that brings the greatest good in your life and to the life of others? Determine those few key categories in your budget and allocate most of your money there. Every time you’re about to purchase something ask yourself if you really want this thing more than what you set as a priority in your finances. Keep this in mind and you’ll be on your way towards building wealth, not only in your finances, but in other areas of your life as well.