As you may be aware, my beloved and I’s Financial Independence journey commenced shortly after my 30th Birthday.
We had just returned from an overseas holiday celebration for my birthday, when I started to get anxious about our financial position. Our holiday had been lovely, but expensive (thanks in part to business class flights and hiring a Ford Mustang to drive around in); and we had put some of it on our credit card. So, I was a bit stressed and regretful.
Around this time I received a regular newsletter update from my investment app, Raiz, which included a link to an article on the FIRE movement. I read the article and a light bulb went off… And, from that moment on, my attitude towards money and consumerism has been different.
Shortly afterwards, I started this blog to keep myself accountable in my Financial Independence journey, and to try to help others from making the same debt-inducing mistakes I had made in my 20’s.
… Fast forward two years and I have just celebrated my 32nd Birthday. It was a lovely day, but I can guarantee there were no business class flights or Ford Mustangs!
So apart from this, what has changed in the last two years?
High interest debt
Two years ago, we had a car loan and a credit card debt. The car loan had $11,262 left on it at an interest rate of 10.29%. The credit card had $3987 left on it at an interest rate of 13.24%.
Paying off these debts before my 30th birthday wasn’t a priority. We were fine with just paying off the minimum payments on these debts and letting them run their natural courses.
However, once I figure out the true cost of these debts, and my views towards money changed, these debts had to go.
Two years later and both of these debts have been paid off. Our car loan was paid off two years early in June 2018. Our credit card was paid off in September 2018, with the account closed swiftly afterwards.
During my late 20’s, if I wanted something and had the money to buy it, I would. As consequence, when I turned 30, I had a lot of stuff… And, bugger all savings.
Fast forward two years and things have changed a lot in this space. I am no longer willing to part with money unless I know it will bring me enough joy to be worth it.
One of the best ways I’ve discovered to control spending is to work out your hourly wage and then determine how many hours of work it will take for you to make the amount of money you’re thinking about spending. In doing so, you ask yourself “Is this really worth 5 hours of my time?”.
I’ve found that most of the time, the answer is no, and I therefore do not buy whatever it was I was looking at. But, when the answer is yes, I know spending the money is going to be worth it.
Letting go of “luxuries”
As I’ve spoken about previously, in my late 20’s, I had let Lifestyle Creep get the best of me and was progressively buying fancier/more expensive things.
Unfortunately, I was following the pattern of most people who earn more money… When the money coming in goes up, the money going out goes up too. This often occurs without us knowing it as we buy nicer versions of things (e.g. more expensive cheese, wine, furniture and cars).
However, as I’ve also spoken about before, usually those of us affected by Lifestyle Creep, can’t actually afford the creep at all and just end up in a lot of debt to “pay for” nice things.
Over the last two years, I’ve broken this cycle through two major changes:
1. Bonus income
Any time I receive extra income from work on top of my base salary, I transfer it straight into one of our savings accounts. This means that I don’t get used to having extra money to spend and can therefore easily save it.
2. Perception of wealth
I’ve changed the way I perceive fancy things and now see most luxuries (except for craft beer, because it’s amazing) simply as corporate marketing trying to trick me into thinking I need something. Marketing that targets our insecurities is how corporations make a shit load of money.
I have been really good at sticking to both of the changes outlined above, however I do sometimes still find myself defaulting into my old ways and then have to focus really hard in order to figure out what’s going on.
For example, a few months back, we booked a trip to go and visit some friends across the country. Flights were going to be about $700 on sale, or $1300 if we couldn’t get them on sale. We had enough Frequent Flyer points to buy the flights outright. However, in my mind I still thought to myself that we should save the points for a Business Class upgrade sometime to treat ourselves, as points upgrades are better value.
Fortunately, after a little bit of prodding from my beloved, I realised that this was a hangover from my late 20’s perceptions of wealth and fancy shit… So, we used the points and let our savings continue to earn compound interest!
Learning to love saving
When we didn’t have much savings, we didn’t really value saving. Instead, we valued spending and the stuff and experiences that came with it.
However, once we commenced our Financial Independence journey, our attitude towards saving changed. Seeing the money build up and earn (or save) interest was rewarding. There’s nothing quite like making money from your money.
As a result, over the last two years we have learned to love saving. In fact, we’ve learned to love it so much that we really struggle to spend it now, even when we need to.
Seeing opportunities everywhere
Before starting our Financial Independence journey, when something broke, we would throw it away. When we bought new things, we would give away our old things or throw them away. Additionally, we would just pay standard pricing for everything.
However, these days, we are much more resourceful. You see, when you become more mindful of money, you become more resourceful too.
Consequently, I look for the potential in items I would have previously thrown away. When something breaks, I try to fix it. If something is too expensive to repair, I pull it apart and try to sell the parts. When we have stuff lying around that we don’t use, we try to sell it. If something that no longer serves a purpose as is can be used as something else, I up-cycle it.
Two years ago, I didn’t even know what net wealth was. To me, wealth was demonstrated by what possessions people had and what lifestyle they lived.
However, as I recently pointed out, nice stuff is not an effective indicator of wealth at all. Due to the ready availability of credit, anyone can have lots of nice stuff, but not actually own any of it.
Consequently, our focus on financial wealth is now about net wealth. In doing so, we’ve paid off a bunch of debt, increased our savings substantially, and upped our superannuation contributions so that 17.5% of our gross remuneration is contributed to our retirement savings each year.
By making these changes, our net wealth has increased by 276% over the last two years, and is continuing to increase as we continually work to decrease debt and increase savings.
Two years ago, I didn’t know what a side hustle was. Additionally, I didn’t see a need for a “second job”. However, these days, I have a spreadsheet with a list of my side hustles, including the costs and revenue of each hustle.
There are a variety of little side hustles that I keep track of, including: selling our unwanted stuff, propagating plants, and this blog (by far the least financially lucrative side hustle, may I add)
Side hustles are just another extension of seeing opportunities everywhere. Once you shift your mind into an enterprising mindset, you figure out ways to not only save extra money, but make extra money too.
Two years ago, I had a financial epiphany. Since then, I’ve worked hard to change the way I perceive money and consumerism.
From cutting back on spending through frugal living, to negotiating better deals on utilities, to establishing side hustles; we’ve radically changed the way we live in order to secure a more financially free future for our family.
Over the last two years we’ve achieved a lot. However, there’s still much more to do on this financial journey. I look forward to the next two years and hope that you continue on this ride with me.