“The first years of man must make provision for the last”-Samuel Johnson
It’s borderline criminal how little I was taught about money in life. The fact that it isn’t mandatory in school is messed up. Unfortunately I only recently realized how powerful it can be to understand money. Even up to a few years ago I didn’t understand that my lifestyle was unsustainable. I had a $400 monthly car payment (I miss that JEEP though), $13,000 in credit card debt, ate out a ton, and basically was spending a little more each month than I was making, but it was cool because I had credit cards to cover the extra. That’s the definition of an unsustainable life, but I didn’t know any better. It seemed like that’s how everyone else was living.
I started reading and researching the FIRE lifestyle and then my whole perspective changed. Once I learned how easy this whole money thing is, the world opened its arms. I could have anything I wanted, just not everything. I figured out that money and (most) material things don’t buy happiness but money does buy freedom and choice. That freedom and choice allow you to do amazing and meaningful work.
Here’s the basics of how I became Ben Franklin Rich.
Track Your Spending
This is crucial. I write down what I spend in a given month, every day. I write down EVERYTHING, down to the coffee I may pick up on the way home. I don’t care if it costs $0.99, I account for everything (rent, student loans [not anymoreeeeee], credit cards [no no], groceries, gas, everything). I was surprised when I first did this, how much gets spent mindlessly.
I don’t account for taxes or anything taken out of your paycheck that you don’t “see”. This is to merely rein in the discretionary spending.
Spend Less Than You Earn
This is simple but not easy. You can’t save what you don’t have. I was somehow surprised that I spent more than I made. I put things on credit card here and there and as I did it said to myself, “I’ll pay this at the end of the month” but it wasn’t fun to pay the full total, so I deferred it to the next month. This is how you end up at $13,000 in credit card debt.
The absolute, very first thing you should do when starting out on the path to BF Riches is to figure out how much you spend a month, then save 4-6 months worth of that in a safe place. It can be in a savings account, under the bed, wherever. This will cover you just in case of emergency (car breakdown, new apartment security deposit, etc). This doesn’t cover Coachella. That’s a different fund.
Some people will say you need to start investing in your retirement fund as soon as your employer matches. Some will say you need to get your emergency fund stocked before even thinking about investing in this. Either way, it probably doesn’t matter, but I already had an account open and was contributing, so I kept going with it and funded the emergency stash at the same time.
If you can afford it, I’d recommend contributing as much as your employer matches. If they do 3%, contribute 3%, if they do 6%, do 6%. If they do 20%, you work at the greatest company there is, never quit.
Once I had my emergency fund stocked and monthly costs figured out, I jacked up my contributions to this. It doesn’t matter how old you are today, the most important thing is just to save into the fund and get used to living without that money.
“Think What You Do When You Run in Debt: You Give to Another Power over Your Liberty.”-Ben Franklin
I got spending under control, had an emergency fund, and started contributing to my 401k. Next up was to start aggressively paying down debts (student loans, credit cards, car payments, etc).
My outlook completely changed when I realized that any debt I have means that I am working for someone else. Go back up to the Ben Franklin quote. Any time you incur a debt, someone then owns your time, and therefore owns you. You’re then not working for yourself. You’re working for your car payment, your student loans, your credit card, etc. You need to produce work to other people standards, because if that work stops and you no longer get money, someone eventually comes to take your things.
To pay down my debts, I listed each debt out, and figured out what interest rate percentage I was paying. I ranked them in terms of interest rate. I decided I needed to pay off my highest interest rate debts as soon as I could, then worked my way down until they were all gone. It meant ‘sacrifice’ compared to the lifestyles of my friends, but after it was gone, it took a huge burden off of my shoulders.
Investing aka How the Rich get Richer
This is the sexiest of the steps and the one with the most options, so this will be the one I breeze over in this post obviously. There’s enough out there to make your head spin, and just like everything else, it can be as easy as it needs to be (cough. Index funds, cough cough). But more on investing in future posts. Just get your money basics down then you can worry about this.