The Meaning Behind The F Word 2

What in tarnation is going on here!?

My eyes scanned through the various transactions in my bank account. I was Playing a game of word association with each purchase, racing through the data trying to put two and two together. How on earth did I make all this money and it has dwindled to a joke of a checking account balance before my next paycheck? Was I charged for something I did not buy? Did someone get a hold of my account balance? Pondering every scenario, it finally dawned on me. Someone did get a hold of my account number…ME. I was doing this every two weeks, and every two weeks it was the same story. How does this keep happening?

I’ve always been what I thought “good with money” because I knew how to invest with a solid return. My problem was not what to do with the money I kept, it was holding on to the money I earned, and increasing my stash when my income would grow. I searched for answers to solve my ever increasing problem. As I searched, it became more clear that what I was running my money as a consumer, not a business.

If you don’t take anything else away from me please understand this:

Wealth is not created based on what you earn, but how you spend what you earn.

Now don’t get me wrong, increasing your income should be your number 1 priority. It should be the lifeblood of your financial goal to increase your savings and get what you want out of life. But, it’s how you spend that income that dictates how wealthy you will become. As Paula Pant simply puts it “You can afford anything, you just can’t afford everything.

How does one achieve this you ask?

The forbidden F word.

Frugality

Now, before anyone chucks their phone into a lake at the thought of one more idiot telling them to not drink their daily latte to become a millionaire, or becoming any more deprived than they already are, realize that deprivation is the exact opposite of what the word actually means. Frugality is creatively curating your money to live the life you want to live.

Did you get that? This is extremely important to understand.

It’s not just for those who don’t make a lot of money, but rather those who choose to understand how they allocate their money in order to invest, travel, or buy their dream home.

It’s actually more freeing than ever, eliminating all financial worry. The more my income rises, the more I need to figure out how to allocate that capital and keep enough of it to reach my goals.

Creativity is the name of the game. Here’s the difference:

A normal person goes on vacation.

A frugal person puts all of their bills on a rewards credit card and goes on vacation for free with rewards points (#travelhacker).  

A normal person buys a pair of shoes.

A frugal person buys a discounted gift card and pays a fraction of the price for those shoes. 

A normal person buys a new car.

A frugal person buys a like new car that’s two years old and has already taken the massive up front depreciation hit. 

Frugality can be summed up in 5 quick steps.

1. Knowing Where Your Money Goes 

This can be done one of two ways:

Scenario 1: Add up how much savings you need per month, then taking that off the top. The difference is what you can spend.

Scenario 2: Create a budget that maps out your goals. You need to spend less than you earn.

[Related: Why Budgets Aren’t Boring.]

2. Invest The Rest

3. Get Creative On How You Spend 

Sometimes this means waiting for a better deal. Figure out how much an item is worth to you and find a way to get it at that price. When the deal comes up, you need to be able to react.

4. Stay Away From Debt

5. Weigh Your Choices 

Choice A gets me this item, but it makes me X amount of dollars less likely to reach my main goal. Every choice needs to be mindful but should never be stressful.