Living Beyond Your Means and building your Big Dream

These days, with digital payments and delivery availability, it's simple to buy so much more. Marketing and materialism are not our friends, but it's easy to get drawn in, especially when life seems hectic or stressful. One of the very first things I work with clients on is to know what's going on with your expenditures. It can be an eye opening experience, one that reveals something David Bach calls “the latte factor”.

It's so important to write down what you spend and where, so you can give your financial world and future clarity and power. Let's look at this closely: if you spend $5 a day on a latte at a coffee shop, over the course of a year, that's $1,825! If you were to invest that $1,825 in an index fund or a high yield savings account, even with a modest 5% average interest rate compounded annually, you'd have $12,413! Detailing your spending can reveal hidden gems, like this one.

I wonder what other spending habits you have that could be converted into your financial freedom? It's worth the effort! I am always surprised by what people consider to be a necessity. While coffee is delicious, it's not actually necessary. There are lots of other, healthier beverages and ways to wake up! For example, exercise, pranayama (like breath of fire, which stimulates your adrenal glands and doesn't deplete them, like coffee will). There are also cold showers and simply going to bed earlier so you can wake up earlier. This gives you more time to wake up slowly and naturally, to meditate and check your financial picture for the day, as examples. I digress… 

Here's a very simple list of necessities:

Home - mortgage or rent 

Sustenance - food 

Utilities - power, water, phone

Transportation 

Insurance

Social Needs(Can be  free!)

Even inside of the necessities category, there are ways that you can reduce costs. For example, what would you save if you were to cook at home instead of eating out two nights a week? Dining out is a lovely luxury, but a large part of your money goes towards the service and the food is not always as healthy for you. Furthermore, perhaps there's a new joy that can be found inside of the hobby of cooking. I know it's one of my hobbies! If you don't know how to cook, there are lots of free videos and I'm sure you have a friend who would be happy to show you how to make some delicious meals. Lots of people eat out for breakfast, lunch and dinner. When you are defining your finances, it's a worthy exercise to delineate how much you're spending in restaurants versus how much you're actually spending on groceries. With the price of inflation, eating at a restaurant even if it's fast food, is not a necessity. Imagine if you invested the money that you're used to spend in restaurants into your financial future-you would have at least double what you saved by not buying a latte every day! Money can add up fast this way! This is not to say that I'm prescribing that you live life ascetically or without any special treats. There are lots of ways to treat yourself that don't cost an exorbitant amount of money. When's the last time you allowed yourself to take a nap in the middle of the day? Or gone to pick wild flowers and put them in a vase on your table? The world is full of opportunities for you to savor and enjoy. 

In the transportation category, is it possible for you to take public transportation and use that time to read a book or meditate? Or even better, can you knock out two goals of getting consistent movement and saving money by riding your bike or walking to work? Is there a carpool at your place of work, one which would give you the opportunity to expand your social network? Perhaps you can negotiate with your boss, if you have one, to work at home a couple of days a week. There are lots of ways to be creative around transportation expenses.

Following are some things that are not necessities:

Cable television 

Web subscriptions like Netflix 

Music streaming like Spotify 

Alcohol, cannabis, nicotine 

New clothes every season 

Makeup

Gym/yoga studio memberships that go unused

Gadgets that repeat the same functions

Sodas and desserts 

Buying books - libraries rule!

Eating at restaurants 

Some of these may seem extreme. However, if you are really committed to your financial future and to your well-being overall, you might consider some of these. I am a huge proponent for play and luxury, but not at the expense of building my big dream. In my coaching, I advise people to set aside 10% of everything they earned for play. This can be money that you spend on items that are in the second list, the items that are not necessities. Unfortunately, I see a lot of people who are struggling with money who spend a lot on things that are not typically actually necessary and then they wonder why there isn't enough for their retirement or for their monthly bills. 

I see more and more around me people exchanging services or items instead of money. We are trading appreciation. It’s also called a gift economy. For example, have you ever been to a clothing swap? It's a great way to revamp your whole wardrobe and not spend a penny. There's so much consumerism and so much promotion of consumerism as the solution to problems, and it's really extraneous when we really think about it.

To each their own, there is no “one way” to build your financial freedom. You have to find your own way. You have to look at how comfortable you are with debt, how comfortable you are with playing with your money, and it's the knowledge of what you're spending it on and then choosing from there that will give you all the power you need. 

Spending beyond your means is something that usually creeps up on you. Sometimes, people have memberships for things that they didn't even remember they were paying for! 

For some, I know that impulse spending is a way to self soothe in times of stress. It can also become a habit that really puts you in the hole financially. Sometimes we get these ideas from our parents or the way we view the universe. Sometimes it feels like we work so hard that we deserve a reward. Rewards are great! I invite you to start rewarding yourself by setting up a savings plan that has money for play and rewards designated, rather than spent without consciousness present. This might require you to say no to yourself in a moment where you really want to buy something. Self-control around spending is a necessary part of building your big dream. You could have the ice cream now, or you can have that down payment on the house you really would like to own. You can have coffee everyday all year long, or in a couple of years you can buy a car that you really need. These are just examples, of course you will find your own way. Here's an idea to consider: if you have to put something on a credit card that you can't pay off at the end of the month, you might be living beyond your means. Credit cards are the equivalent of indentured servitude, and I think it's important for people to learn to live without them, especially if they don't know how. You can create a savings plan with us here at Big Dream Coaching where you have enough money for all of your necessities for your long-term savings for spending, as well as for fun and play!

If you'd like help dissecting your expenditures and optimizing the money you have already, drop us a note and we'll lend you a hand.