According to the CIA’s “The World Factbook,” the average American should expect to live about 79.68 years, or 41,879,808 minutes.
If you’re lucky, you’re going to spend about one-third of those minutes sleeping. With those that remain, the idea is to spend as many as you can doing what you want to do rather than what you have to do.
How do you maximize the minutes you spend at leisure and minimize those you spend at labor? You become financially independent. Here’s some proven advice to get you there in as few minutes as possible.
1. Motivation: Think time, not money
Almost every resource you have, from physical possessions to knowledge, is renewable. The amount of time you have on this planet, however, is finite: Once used, it can never be replaced.
Let’s say you can live on $100 a day. If that’s true, then every time you forgo spending $100, you get a day closer to financial freedom. So create a mental yardstick to hold up against potential purchases.
Ask yourself: “Which will make me happier — this purchase or retiring an hour, day, week or month earlier?”
2. Mechanics: If you want to work less, make your money work more
Say you set aside $1,000 a month. If you earn 1 percent interest on it for 30 years, you’ll end up with $419,628. Earn 10 percent on it, and you’ll end up with $2,260,487. The 1-percenters have a nice nest egg. But the 10-percenters have it much better. Not only are they financially free, but their kids might be as well.
“But wait!” you say. “There’s no way to safely earn 10 percent. And if I lose my money, I’ll be worse off than I was before because I’ve also lost all the time it took to earn it!”
True. And the same logic applies to love. If you’re going to find the love of your life, you’re going to have to risk pain if it doesn’t work out.
The solution? Be wise with both your money and your heart: Think it through before you make a move. Act cautiously but don’t miss an opportunity by standing there like a deer in the headlights.
3. Method: Small and soon, not large and later
Shortly after I began my television career in 1988, I went on set with a pack of smokes, a can of soda and a candy bar. I explained that these things represented the kind of money most of us throw away every day without thinking about it — at the time, about $5.
But compound $5 a day at 10 percent for 30 years, and you’ll end up with well over $300,000. That’s why saving small sooner is better than trying to save large later.
Fortunes are rarely made by investing big bucks, nor are they often made late in life. Wealth most often comes from starting small and early.
There are limited ways to become financially independent. You can:
- Marry well
- Build a valuable business
- Successfully capitalize on exceptional talent
- Get exceedingly lucky
Or, you can spend less than you make and consistently invest your savings over time. Even if you’re on the road to any of the former, why not do the latter?
4. Management rule No. 1: Avoid debt
I’m always getting questions about debt. “Should I borrow for this, that, or the other?” “What’s an acceptable debt level?” “Is there such a thing as good debt?”
There’s way too much analysis and mystery around something that isn’t at all mysterious. Paying interest is nothing more or less than giving someone else your money in exchange for using theirs.
Rule of thumb: To have as much money as possible, avoid giving yours to other people.
Pay interest in only two circumstances: when your back is against the wall, or when what you’re buying will increase in value by more than what you’re paying in interest.
5. Management rule No. 2: Save more by spending less
The key to spending less is to avoid deprivation: Reduce your expenses without reducing your quality of life. How?
- Never buy new what you can buy used. That brand-new sparkle comes at a high price, on everything from cars to furniture to clothes. Let somebody else take the hit. Instead of heading to the department store, head to the consignment store, thrift shop, yard sale or websites like Craigslist or eBay.
- Always ask for a lower price. People say you get what you pay for. I say you get what you ask for. In addition to negotiating on more traditional things like houses and cars, you can score lower prices on hotel rooms, doctor’s visits, cable bills, car repairs — pretty much everything. From now on, consider the price of services or big-ticket items as what they are: an opening bid. Check out “Those Who Haggle Save Major Money.”
- Stop paying for name brands. What’s in a name? Often nothing more than a higher cost. Paying more is OK, if the higher cost means higher quality. But it’s not OK to pay more simply to help pay for some company’s annoying commercials. One of many examples: More often than not, generic patent medicines like aspirin and cough syrup aren’t just similar to their brand-name counterparts, they’re identical. Check out “12 Items You Should Always Buy Generic (and 4 You Shouldn’t)” for more.
Do you have money-saving tips that don’t take a bite from quality of life? Share them in our comments section below or on our Facebook page.