Your Spending Habits Creates Wealth | Financial Flexibility #012

If your net worth is below $100,000 or you are just beginning your career the quickest way to increase it is to cut your spending. Understanding your budget, what money is coming in, what's going out, and if there is any leaks is the key to exponential growth.

Creating an Aggressive Budget = Aggressive Results

I've spoke about the basic budget everyone can start with, 50/30/20. 50% expenses, 30% discretionary, 20% savings. Take a look at your past 2 months budget, account for every purchase/bill down to the penny, did you achieve the 50/30/20 split?

If you're looking to reach your first $100,000 you need to be more aggressive with this split. If you made $50,000/year it would take 10 years to save $100,000 using the 20% savings rule. I don't know about you but I want to accelerate that timeframe.

Choose whatever split you'd like but the most "everyday millionaires" use a 30/20/50 split. If you made $50,000/year it would take 4 years to save $100,000 using this aggressive split. You would be able to save $250,000 over the course of 10 years instead of $100,000!

Why Your Spending Habits Suck & Why It Takes So Long to Save

Saving $300/month on your discretionary spending and expenses is $3600/year more in your pocket. A $50,000 portfolio producing 7% returns is $3,500/year. If you do not have a net worth of $100,000 or more the fastest way to increase it is to cut expenses and discretionary spending.

Rent, groceries, student loans, car loans, gas, uber, eating out, bars, traveling, your pets, etc.. These things are all way too expensive for you. You're pushing your lifestyle to it's absolute monetary limit, stressing you out and causing anxiety about finances. The hard truth is that the majority of people ages 22-30 do not keep a detailed budget and their spending is out of control. If you have high debt and lots of bills, you cannot afford to take a vacation or eat out 3x per week.

It's hard to create a $50,000 stock portfolio that consistently produces 7-10% returns. It's so much easier to cut expenses and discretionary spending by $300/month. Try to find some consistency in your spending habits and start with baby steps!

1. Create a detailed budget down to the penny, one that you can update as you spend throughout the month.
2. Create an emergency fund of 3-6 months expenses.
3. Trim all of the fat/excess from your budget. Expensive car loans, dining out too often, paying too much in rent, etc...
4. Create a retirement account. The earlier you begin contributing the earlier you can retire and quit working 60 hours per week.
5. Invest in long term growth oriented assets like stocks and ETFs.