MONEY Master the Game: 7 Simple Steps to Financial Freedom (40 page)

WHAT ELSE CAN YOU DO?

Houses and cars aren’t the only places where we can save. Where else can you work at axing expenses in your life that no longer give you value? I know the idea of living on a budget is totally unappealing to most people.
I don’t want to be put on a budget and my guess is you don’t either. But what I do believe in is a spending plan. I like the idea of planning how to spend my money so that it gives me the most joy and happiness but also ensures my financial freedom long term.

Now, to be fair, if you’re one of those people who says, “Screw it, I’m not going to save; I’m just going to focus on earning more,” then you can just go ahead and skip right over to the next minichapter on earning more and adding value. If the idea of saving just completely exhausts or bores you, you’ve got four other strategies to help you speed things up, and I don’t want you to miss them because saving isn’t for you. But if you do, stay with me.
I promise you that little things can make a big difference long term—they add up to surprisingly giant numbers.

To be fair, Amazon and brick-and-mortar bookstores have entire sections filled with books on how to save more money.
Dave Ramsey
is a very caring man with several books in this area, and
Suze Orman
is another author worth investigating if you are looking to find savings. But we’re going to take a few pages here to highlight the best simple strategies now.

One thing is for sure: you can create a spending plan that helps you decide in advance
how
and
where
to spend your money to give you the greatest returns today and in the future.

Remember chapter 1.3, “Tap the Power,” where we looked at how ordering in pizza with friends instead of going out to dinner could save you $40 a week, or $2,080 a year? At an 8% return, that turns into more than $500,000 over 40 years. A half million dollars! That’s a whole different retirement picture than most Americans have today. That kind of money, on its own or added to our 401(k), can certainly help make us rethink our daily Grande skim latte with a shot of vanilla.

Financial expert
David Bach
is a good friend of mine who got his start by attending one of my financial seminars more than 20 years ago. He made a decision to pursue his dream of helping people become financially independent, and just a few years later, I hired him for his first paid speech. Today, through his passion and dedication, he’s helped educate over four million people through his bestselling book
The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich,
which includes the concept of creating wealth through finding what he calls your “Latte Factor.” And it’s not just about coffee: the Latte Factor is simply a metaphor for all those small purchases that we don’t even consider—things we wind up wasting our money on without even realizing it. But if you are a coffee fiend, how much is that addiction costing you? Let’s say you’re a casual “user”: at $4 a day, you’re effectively giving up almost $56,500 of savings at 6% interest over 20 years. For a single drink! But let’s be real: the Starbucks loyalist doesn’t go just once a day. What about the real evangelists who are there two or three times a day?
Take your $4 habit and boost it to $10 a day, and now you’re drinking away over $141,250 in savings over 20 years. That’s the cost of a four-year college education!

What if you’re a purist? You don’t binge on caffeine; your body is a temple. But bottled water is your thing. Got any Fiji or Evian enthusiasts out there? Or frankly, even if you just stock up on Poland Spring at Costco, how much are you spending on bottled water every year? A young woman I work with, whom I adore and who considers herself very socially conscious, is about to get married to a guy who regularly buys 12-packs of 1.5-liter bottles of Smartwater. How smart is that? He buys them three at a time, 36 big bottles in total, which lasts him about two weeks and sets him back $75. He’s spending $150 a month on water, almost $1,800 a year—on something he could get free from the tap, or filter with a Brita water filter system and a few Nalgene bottles for $50 to $60 a year. Forget that he’s killing our planet; he’s also killing his wallet. I know her fiancé would be much happier if that $1,800 a year was going into their savings account and compounding annually. At 8% over 40 years, that’s $503,605 being pissed away—literally.

I’m not saying you have to give up bottled water or stop getting coffee, but the savings are there somewhere. Isn’t it time to find them?

And finally, let’s not forget about our impulse purchases: you know, the ones that feel great in the moment, like the pricey work bag or the beautiful Hermès tie. Lisa, a young mom from Nashville, has a taste for the finer things in life. She drives her husband batty with her impulse purchases. She’ll come home with a great new dress or an amazing pair of boots, and her husband will invariably ask, “Were they on sale?” or “Did you check online to see if you could get them cheaper?” After several spats, Lisa and her husband agreed on a new plan. When Lisa found herself unexpectedly at Saks Fifth Avenue or Jimmy Choo, she’d take a photo of her next “must-have” and send it to her husband. He had two weeks to find her a better price online; otherwise she’d order her purchase over the phone at full retail. But as Lisa sheepishly admitted to me, over 80% of the time, he did find whatever she was looking for—at often at 20% or 30% cheaper.

So take a page from Lisa and her husband and check out all the online rewards programs that can save you real money.
Upromise.com
helps you earn cash back for college from your everyday spending, from online purchases to dining out and booking travel. You can put those savings toward a student loan, savings account, or 529 college savings plan, a tax-deferred savings plan set up by parents for their kids’ college tuition. And if college
has passed or it’s not a priority, but cash is, there are hundreds of other cash-back websites out there—Extrabux, Ebates, Mr. Rebates—all of which can save you 10% to 30% on purchases at thousands of online stores. As for Lisa and her husband, they put all their savings back into their Upromise account, and now everyone feels better about that pair of stilettos.

At the end of the day, the question to ask yourself is this: Do my expenses, big and small, bring me the thrill they once did?
It’s not about depriving yourself; it’s about adjusting your spending habits to mirror your core values and indulge only the experiences that truly matter to you.
That
deliberate spending allows you to invest in a quality of life that is sustainable and brings you joy. Whether you’ve got 20, 30, or 40 years to invest, no matter where you are, how much you can save, or how many years you’ve got to do it,
you can take advantage of the unparalleled power of compounding.
Financial security, financial independence—whatever your goals, you will get there a whole lot faster when you put your money to work for you.

It’s not about lifestyle, it’s about
timing.
Why not make simple changes today to insure you have more than enough down the road to continue to fund your lifestyle
and
your dreams? You can still enjoy life’s finer pleasures—but you’re in control now. You get to choose how to allocate your funds and where to get the biggest bang for your buck. Whether you’re going to tackle your mortgage expense or trade in those fancy wheels, make your online purchases work for you or do a little better on your everyday expenses—it’s in there. Real, meaningful savings, to the tune of
hundreds of thousands
of dollars to a million dollars or more are there for you to find and to reinvest.

Now let’s turn the page and uncover the fastest way I know to speed up your plan and achieve financial independence faster. Let’s learn to earn more.

MINDFUL SAVINGS

Here’s a quick-and-easy six-step exercise to get you thinking more aggressively—more
purposefully
—about saving:

1. Brainstorm about all the recurring expenditures that you could eliminate or reduce to cut your expenses. Car insurance, cell-phone bills, lunch money, movie tickets. Think about where you can make changes.

2. How much do these items or activities cost? Highlight the most significant of these expenditures and make a note of the associated costs. Next, calculate how many times per week you indulge in this expense and take a reality-check snapshot.

3. Now, on a scale from 0 to 10 (with 0 representing
none
and 10 representing
extremely pleasurable
), how much joy do you get from each of the items above? Attach a number to each activity or item to help you associate these costs to your life.

4. Next, think of what it would feel like to have Absolute Financial Freedom. Remember how you responded to that concept back in chapter 3.1: “What’s the Price of Your Dreams? Make the Game Winnable”? Remember how it made you
feel
? But at the same time, remember that this was a feeling you experienced in the abstract, in theory. Here it’s close enough to taste. What would you be able to enjoy, have, do, be, or
give
if you were absolutely financially free?

5. Decide which is more important to you: the joy you receive from the recurring expenditures on your list or the feeling of Absolute Financial Freedom. Remember that life is a balance. You don’t have to cut out
everything
from your list to move the needle on that feeling of freedom.

6. Write down at least three expenditures you are resolved to eliminate. Calculate how much money this will save you over the course of the next year.

CHAPTER 3.4

SPEED IT UP: 2. EARN MORE AND INVEST THE DIFFERENCE

Try not to become a man of success, but rather try to become a man of value.

—ALBERT EINSTEIN

Okay, let’s kick into second gear. If saving is one way to speed up your plan, there is an even faster way that literally has no limits—
if
you unleash your creativity and focus, and become obsessed with finding a way to do more for others than anyone else. That’s how you earn more and shift into the fast lane to freedom.

DRIVING A TRUCK TO FINANCIAL FREEDOM?

When I was growing up, my mother had a great plan for me. She wanted me to become a truck driver. She had seen these ads on television, over and over, for Truckmaster truck driving education school. She told me that with a little training, I could qualify as a truck driver and make up to $24,000 a year. Wow, $24,000! That was twice what my dad was earning as a parking attendant in downtown LA. She thought that this would provide a great future for me. She worked into her sales pitch that I’d have the freedom to be on the open road and drive. It actually appealed to me on a certain level: the idea that I could just turn on my music and go—kind of a cool thought for a 14-year-old kid who wasn’t even driving yet. I’d have the opportunity to get up and go instead of being stuck in an underground parking garage for 30-plus years.

But after all of the misery I had witnessed, all of the shame associated with four different fathers, of never having enough money for clothing or
food, I realized I could never drive a truck long enough or far enough to allow me to escape the pain of that situation. In my head, I decided that there was no way in my lifetime I would have a family that would suffer this way. On top of that, I wanted to use my mind and my heart. I wanted to get in the game of life at a different level.

I looked around and wondered how other people’s lives could be so vastly different from my own. Why were we struggling constantly to make ends meet, to stay ahead of the bill collector—choosing between canned beans or spaghetti with ketchup because we couldn’t afford tomato sauce? And yet, in the same city, not far from us, kids I went to high school with were taking fancy vacations and studying on picture-perfect college campuses—living a life well beyond my wildest dreams—a life so obviously different from the one we would ever experience. What did they know that we didn’t know? What were they doing differently from my father and mother?