/ Savings

6 mistakes that keep you poor

In this post you will learn:

  • How do I become wealthier?
  • What are the key mistakes that keeps you from becoming wealthy?
  • How can I increase my wealth and freedom?
  • How retire early?

Some people might say saving is hard. But for the majority of us, our middle class life is a clusterfuck of waste. Once you realize this, becoming financially free is so much easier.

There is only one way to become rich: earn more than you spend.

This means you can either optimized

  • your income
  • your spending

Pretty simple? Well in this post, we will look at the spending side. The key is to keep it simple.

Dont buy shit you don't need.

Before buying something, think twice about. You should also procrastine when it comes to buying stuff (take your time, there is no hurry).

Reconsider if you really need something. Will it improves your life or are you falling into the marketing making you believe it will.
This means reconsider the new car, the new watch, the new fancy clothes, etc...
But it's fine to splurge on what you will use a lot. It's ok to spend 1500$ on a nice Mac you will use everyday. But refrain from spending the extra 20000$ for a luxurious car.

One area I've been trying to improve recently are my groceries. I've been myself finding myself throwing a lot of food. One trick I'm using now is to eat everything before going back to the grocery and buy less to avoid having it spoil. This force you be creative and mix ingredients you would not otherwise consider.

Stop eating out

My friend says she doesn't like to cook, so eats out. She argue that half the time she doesn't pay for it (perhaps only a girl could pull this off).

Eating out is a lose-lose for you for the following reasons:

  • You eat shitty un-nutritious ingredients. The fact is restaurants need to optimize profit. Labor is very expensive and they can only optimize so much of it since someone has to make the food. Your left with the ingredients as the main variable cost. Guess what? Any business will try to optimize their variable costs. So buying cheaper and lower quality product will improve their operating profit.

  • You waste time. Most complex recipe might take about 20 minutes to prepare. Usually you will end up with left overs. Going to a restaurant, the wait itself will be 20 minutes.

Decouple the relation between fun and expensive

Some people associate fun activities with expensive activities. A high cost activity means it is scarce (such as a famous concert, a NBA or NHL playoff, etc...). But that doesn't mean a scarce activity is more fun. You need to realize that you only pay for the scarcity, not for if the activity is fun or not.

As a FIRE apprentice, you need to realize that experiences are cheap. Whether it's (hitch hiking in Japan)[http://www.befreeandwealthy.com/2017/05/07/optimizing-risks-for-maximum-happiness/], going to the beach (or surfing), going camping or backpacking.

Our lives is full of potential amazing cheap experiences you can enjoy.

When I travel I love to stay in youth hostel. I could spend a lot more and stay in a 5-stars hotel, but the youth hostel bring such a different experience. You might meet other travelers, party with them playing beer pong. And you will have experiences that will be unique.

See money as a freedom tool

Your money is freedom. If you lose your job and you have savings, you could go on a 6 month trip before finding a new job. If you want to stop working for 2 years to attend graduate school, you can if you have savings.

Get rid of the shit you don't need.

Hoarding stuff has a cost. And a huge cost. If you don't need something, then get rid of it.

Also if you have trouble getting rid of things, remind yourself that someone else might really need this.

Get rid of all debt.

Debt is expensive. Just like compounded interest works for you with saving, it works against you for debt.

I also very skeptical of the argument that it's better to earn money with higher return investments than paying down your debt. This could be true, but you need to take in account the taxes in the math.
The debt payments are after tax, while the interest income is taxable. 4 % interest of debt will require and investment gain of 6-7% to only break even. These days, a guaranteed return of 7% is not that easy.