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Like many people, I spent my college years being extremely frugal.
I did all kinds of things in college to save money. I ate absurd amounts of ramen noodles, as it was an extremely cheap form of calories. I lived in a tiny apartment with as many as seven other people to get rent well below the $100 per month line. I went to all kinds of on-campus events mostly under the lure of free food. I avidly traded textbooks in order to save cash on my own books and try to get more valuable ones for resale purposes.
Those efforts helped me to keep my student loans significantly lower and managed to help me make it through some very thin months in terms of income later in my college career. I lived on very little income and I managed to keep myself fed, keep a roof over my head, and even occasionally have a few dollars for entertainment.
When I graduated and started earning a good salary, everything changed. My spending went off like a rocket. I replaced my whole wardrobe. I bought tons of new gadgets. I moved to a different apartment. I went from commuting on a bike and occasionally on mass transit to owning a shiny new vehicle. I started lots of different collections.
This eventually led me to a very sticky financial position, and it was that very financial mess that led to the birth of this website that you read, as it started as a chronicle of my financial turnaround.
As I look back on the whole mess, though, it's clear to me that I would have avoided many years of heartache if I would have simply maintained my frugality from college into my post-college years.
That one simple move would put me in better financial shape today and saved me many years of stress and mistakes.
I believe this to be true of almost anyone who goes through a period of significant increase in their salary. It's extremely tempting to inflate your spending along with the inflation of your salary, but in doing so, you end up with the same kinds of financial problems where it's difficult to make ends meet.
That's why there are so many stories of people out there making $300K or $400K and struggling to make ends meet.
They allowed their spending to increase as their salary increased and often made heavy long-term financial commitments along the way (such as a large mortgage).
The reality is that I live my life today much as I should have lived my life after college. My wife and I collectively spend quite a bit less than we earn. We have no debts. We put aside the rest for the future. We have things in our lives that provide contentment and happiness without spending a lot of money.
My biggest regret as an adult is that we didn't migrate to this kind of life as quickly as possible when our incomes increased and we weren't forced to remain frugal.
So, let's say I had a time machine and could go back and talk to my earlier self, just on the cusp of earning a lot more money. What would I tell him?
SEE ALSO: Why it seems like everyone else can afford the things you can't
Ask yourself constantly whether you'll care about this when you're old
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Every single time you spend money, step back for a moment and put yourself in the mindset of where you'll be in the future — 10 or 20, or 30 years from now.
Will you care at all that you spent money on this thing? Will this purchase create any real positive contribution to your life at that point, especially as compared to not buying it or to a cheaper alternative?
Whenever you experience a temptation to spend more money on something than you would have previously spent, step back and ask yourself this question.
If you're eating out at a place like Applebee's instead of preparing a simple meal at home, does that purchase create a real positive contribution to your life? What if you're going to the same takeout place every single day and dropping $10 instead of bringing your own lunch to work? How is that purchase contributing to your life in a valuable way that you'll notice in twenty years?
If you're thinking of buying another hobby item instead of getting more enjoyment out of what you have or borrowing that hobby item from the library or someone else, what value are you getting out of that purchase, and is that value something you're going to relish in ten years?
This isn't to say that you shouldn't spend money on things that are enjoyable now, but the reality is that many things that will have a big positive impact on your life in twenty years are going to be worthwhile now, too.
Make an effort to fill your days with those things. Devote your money and time to things that will pay off in twenty years, or that you'll reflect on as having a positive impact on your life in twenty years, and toss aside and minimize things that won't.
This mindset, for example, pushes you to make most meals into simple and healthy fare while saving special meals for truly special events rather than making them ordinary. It pushes you to only upgrade items when they're producing real additional value for you beyond what you already have. It pushes you to be careful about buying more hobby items rather than using what you have or borrowing items. It pushes you to try to make meaningful choices with your time.
Filter everything through this thought process. Make it a key part of your decision about how to spend your time and your money. Think through your decisions again after you make them, and think through upcoming decisions in the same way.
Automatically save some of your income starting from day one
When you have money sitting idly around in your checking account, it can be very tempting to just spend it on something that seems enjoyable. It's an extension of that old maxim; the devil finds work for idle hands to do. That's idle money, and it'll probably wind up being spent on something unimportant.
The solution to this problem is to find a purpose for every dollar that comes in, then put procedures in place to put those dollars to work as effortlessly as possible.
So, how do you find a purpose for every dollar? The key to this is making a spending plan. Sit down and make a plan for where you want all of your money to go. This is a great theoretical exercise to take on on the cusp of seeing a rapid increase in salary, as you can make decisions about a lot of income without having to deal with patterns you've already established and commitments you made.
Let's say you get a job making twice as much as you make now. Great, huh? Before you jump in and start to see all of that money flowing in, sit down and make a monthly spending plan for yourself. How are you going to spend this income? Rent? Transportation? Utilities? Emergency fund? Saving for retirement? Rapid debt repayment? Food? Hobbies? Where is all of this money going to go?
Then, when you've figured out where that money is going, set up automatic payment for many of these things as soon as the extra money starts coming in. Set up an automatic transfer into your retirement accounts. Set up automatic bill payment. Set up an automatic transfer to build up an emergency fund. This way, every single dollar you have is marching off to its intended purpose on its own, without you having to even think about it.
This leaves you with a smaller pool of money for more flexible spending — things like food and entertainment and hobbies — that you can spend as you see fit.
Don't abandon stuff you enjoy now just because it's 'cheap'
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When I was in college, I used to spend long hours going on walks. I'd walk all over town and discover new things each and every time. I'd wander down by the river. I'd wander into a new neighborhood. I discovered this wonderful quiet area on the trails in this large city park that I frequently went to. I'd often take a book from the library back there and read it for hours.
When I started earning more income, I decided I didn't really have time for that in my life. I started going to a gym instead for exercise replacement. I started buying books. I started going out all the time with my professional peers and spending lots of money.
That seemed like the right thing to do at the time, but the truth of the matter is that all of that was completely forgettable. I have far more memories of — and have received far more long term value from — those afternoons spent wandering around trails, reading books on a tree somewhere, and just exploring — than I ever did from the things I spent far more money on.
So, what do I do when I have a spare afternoon now? I go on a hike. I often have a book from the library in my backpack. And if I have a spare hour or two along that hike, I'll find a nice spot on a fallen log and read that book.
Here's the thing: Just because your income goes up doesn't mean you have to change the things that actually bring you joy in life. Keep enjoying the things you were enjoying on a low budget. If you have a hobby you enjoy, keep enjoying it in the same way you always have.
See the rest of the story at Business Insider
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