I had an opportunity to speak with some old friends over the past few weeks. When I say old, I mean that I met these people when RIP was the new rage. Needless to say, I’ve known these people for quite a while and feel quite comfortable asking questions that a lesser acquaintance might consider rude.
These ‘catching up’ conversations inevitably lead to a very interesting question — “So, how are you doing?” In other words, we want to know if we’ve done better or worse in life (otherwise, and financially) than the people who were with us when we started our professional journey. After a long dance of innuendo, egregious embellishment and tales of large fish that got away, we arrive at the truth. The truth, in this case (sorry, guys) is that not one out of all of them have any savings to speak of. Not one. But, they all have at least three monitors, the latest and greatest camera that Nikon or Canon has to offer along with every older model, several ‘pads’, cars they really can’t afford, kids they really can’t afford and a mountain of debt. Some of them also have houses they can’t afford.
What part of pay yourself first is so difficult to grasp? Just because you get a great job doesn’t mean you can spend as if you don’t have student loans. When you have debt, there is no surplus. By not having at least a year’s worth of expenses in the bank (and hopefully more set aside for when you soak your teeth in a cup) you are actually alienating interesting opportunities.
When you take money off the table, you can work on what you want to work on. You get better, you innovate and you become a bit sharper than you were. In this day and age, rare opportunities require someone who isn’t just highly skilled, but bold enough to realize that participating would be risky but almost certainly lucrative. This is why ideas are seldom worth much because they are seldom implemented and marketed.
Your cushion is your gateway to being able to say “This will work!” while having the resources to do something other than day dream until you hear about someone else actually implementing it on Reddit or Slashdot. Your savings is your guarantee that you can actually act on a good idea and never become a wage slave. To build it, all you have to do is control yourself:
- If you can’t pay cash for a gadget (without dipping into credit to offset the purchase later), don’t buy it.
- Invest wisely in your career. You probably need a few books a lot more than anything else.
- Do you really need 500+ channels to watch?
- Can’t you pack a lunch? A thermos of coffee?
- Do you really need a new computer every time you get a tax refund check? Do you find yourself spending it before it arrives?
- Do you really need a fiber connection, or the most expensive package your ISP offers?
These are just examples of how people short circuit being self directed, one month at a time.
One of the smartest bosses I ever had asked me a very interesting interview question — “How do you make a profit?” I went on and on about all kinds of stuff like time management, project management software and feeling out vendors. He stopped me fifteen minutes later with a phrase that has stuck with me ever since:
“Bullshit, you manage your costs.“
Like it or not, your life is a business, well, at least part of it is. Run it well. Try to resist the urge to spend while enjoying the fact that you saved just a little more this month.