“Does this spark joy?”
I love how Marie Kondo managed to make living cheap sound like an adventure. But sure, whatever makes it easier for you.
If you want to take it one step further, try “Would it kill you to live without this?” is a good addition to the question repertoire. It’s pretty extreme, but the point is to temporarily attempt to hold on to your money like it’s the last turkey on Thanksgiving.
Because that’s a challenge I want to issue to you: live with the bare minimum for a little while. Think Scrooge, except you’re not haunted by the ghosts of Christmas past, present, and future.
And the good news is that you don’t have to do it forever, only until you have some serious money. And how much that is depends on where you live. For example, the cost of living where I live is high. So “serious money” for me is earning at least $60,000/yr and having $100,000 in the bank.
If you want to multiply your money later on, consider Marie Kondo your spirit animal. Or Scrooge, if you’re more of a Charles Dickens fan.
The not-so-secret secret to getting rich: earn more than you spend
There’s more to it. But if you want to save money, you need to reduce your spending. And I highly encourage saving because:
- It takes the pressure off taking on a second job.
- It’s easy to do.
- It’s a lifelong habit that will be useful to you forever.
And do this long enough, you can start multiplying your income through smart investments and finally enjoy all your hard work. You may also want to try these unconventional strategies to save thousands of dollars in just a few hours.
Living cheap is just the extreme version of saving. Your goal isn’t just to save; it’s to create skills and financial capital for your future investment ventures.
3 reasons it pays off to live cheap for a while
1 – You need to set your priorities straight
I’m sure you haven’t tried living with just the bare minimum, so you’d be surprised how many of your “needs” you can live without.
This one is the biggest for me because it helped keep me grounded. And it still does. That’s how I keep myself from expensive impulse purchases. I know that at the end of the day, I’ll likely just forget about it.
And if you’re satisfied with less, you can allocate more to something that matters.
2 – Saving can make or break your future
By living with the bare minimum, you get a sense of how much you really need if you want to retire early.
You can make all the calculations you want. But it’s never going to be as accurate as actually living the Scrooge life.
And if you think investing in the stock market will get you the same results as cutting back, you’re wrong. Historically, the stock market yields an average of 10% annually. That won’t cover the savings you get from spending the bare minimum.
Say you have a family income of $100,000, and you save and invest $6,000 per year like an average household. So after ten years of saving and investing, that will grow to just over $95,000. How long do you think it will take you to spend that?
Now think of how much better of you’ll be if you learn to live on just $50,000 per year and save the rest. This means you’re almost always better off saving lots of money than playing the stock market.
3 – You can start by investing in yourself
When you see the extra cash in your savings account, use it to generate momentum that will bring you more income. You don’t have to wait until you have lots of money before you invest. You can start by investing in yourself. This can include:
- Learning a skill that can increase your income by a couple of few dollars every month. Think getting a new certification, or taking a leadership course that will make you “management material.”
- Paying off your credit card debt, so you stop paying high interest. Cutting ties with high monthly fees is a lot like seeing a boost in income.
- Investing in your house and making a rentable basement to earn an extra thousand dollars every month
The two-step method to living cheap
Embracing living like a cheapo only requires two things: willpower and discipline. That’s it! No need to mourn your stuff or do anything special.
Step 1: Pare back until it hurts
Paring back lets you figure out what’s important to you. Knowing this helps you determine how much you need every month.
And everything that you can live without? You can stick it in a storage unit for cheap. This makes it easier for you to move to a smaller space or get a tenant.
The same goes for the services and other luxuries… Do you really need your groceries delivered to your home? Maybe you don’t need to get cleaning services too because you have the whole weekend to do everything yourself.
And after a while, you can…
Step 2: Add back the things you miss
Don’t take this as an excuse to splurge on late-night home shopping channels as a reward for cooking at home.
But if it turns out you can’t stand to live without Friday-night pizza, go for it! You deserve to spend on what makes you happy, as long as you don’t go overboard. You can also outsource chores you hate doing.
If you don’t fall into your old habits, you’ll still save thousands every year, even with the additional purchases on things you miss.
Would living cheap spark you joy?
Living cheap isn’t fun or easy, but you should do it anyway. It’s like eating a jawbreaker: kind of time-consuming and annoying before you get to the center, but the filling in the middle sure is worth it!
Financial success isn’t always easy when you’re first making a radical change but if you want to be rich before you’re too old to enjoy your money, learning to save now will spark lots of joy for decades to come.