credit: Freedigitalphotos.net
When asked the first step to financial freedom or to get out of debt, most people will say that it is to make a budget or to cut out expenses. The next step is to save and invest. These are the basic steps to having success in reaching your financial goals. However, without changing your money mindset, it will still be difficult to attain and maintain those goals. One of the reasons why I really enjoy reading the blog written by Mr. Money Mustache is because his guide to financial independence is not a mere how-to guide to saving by budgeting and cutting expenses. He has made Mustachianism into a way of life! He explains that you can have a good life living frugally or said in other terms, you can be living rich cheaply! Whenever opponents deride his extreme sacrifices to reach “retirement,” he contends that he has a nice house, eats organic foods, and has plenty of “toys.”
In an article by Laurie from the Frugal Farmer, she wrote about getting out of debt and said that you should view it as a “lifestyle change” rather than a “diet.” I think that is an excellent analogy, whether you are talking about getting out of debt or pursuing financial independence. With a diet, you inevitably get off the diet once you’ve reached the desired weight. This is one reason why almost all diets fail. Once you’ve reached the desired weight, if you go back to your prior lifestyle, you’ll gain back the weight and have to diet once again. Not so with a lifestyle change. If you change your lifestyle to one where you eat healthy and exercise, you will very likely be able to maintain that desired weight without ever dieting.
Similarly, dieting in the personal finance world would be akin to cutting expenses by making “sacrifices.” If you see cutting expenses such as cable television, fancy clothes, eating out or other luxuries as a “sacrifice” and self-deprivation, then it will be very hard to reach your financial goals. Changing your mindset where buying fancy clothes and eating out all the time is not a sacrifice is key in making strides in your money goals. You have to learn the difference between a want and a need. You have to prioritize and do some soul searching and figure out what really brings you happiness. Is it spending quality time with your loved ones or is it buying an luxury items? But once, again, changing your lifestyle does not necessarily mean not having many of the things that the Joneses have. This is living RICH cheaply, not living cheap cheaply.
Instead of buying a luxury car such as a BMW or a Mercedes Benz, I bought a Hyundai Sonata used. Both cars get you from point A to point B. I’m sure the luxury cars have some fancy features, but I don’t really know what they are nor do I care because my car is perfect for me. It has all the latest safety features, it is comfortable, it is reliable, it gets me where I need to go, and I do think it is a pretty attractive car.
A lot of people need to have the latest tech gadgets such as the newest iPad which costs about $500. I already have a laptop, so there really is no need for an iPad. Actually the laptop has more functionality and was cheaper than that iPad. But I am a little ashamed to say that, I did buy a tablet as well recently. What can I say, I indulged myself. I bought the Google Nexus on sale (as the model has been out for a year), with a coupon, reward points, cash back for $125. I figured at that price, I could afford to indulge a little.
Fancy clothes? I’m not a slave to fashion and rarely need to buy new clothes. I like to think that I have a “classic” look so my clothes don’t go out of style.
Going out to eat? When I’m busy and tired I might not enjoy having to cook, but in general I’ve learned to love it. (My wife and I love watching cooking shows and competitions like Master Chef). I like trying new recipes and I like that the food I make is healthier. But yes we do go out to eat. We don’t dine at fancy restaurants that charge an arm and a leg. Why? Is the food better? Not always. Maybe the decor is nicer, but when I eat out, I’m there for the food not the decor. And of course, we always find deals when we eat out.
Instead of going out to watch the latest movie, my wife and I watch Netflix in the comfort of our own home. So no, I do not think we are depriving ourselves. We are still enjoying life. We’re just not spending as much doing it. We are Living Rich Cheaply!
How did you change your money mindset? When you cut out expenses in your budget, do you think you are depriving yourself something?
I definitely agree that you have to be in a certain frame of mind to make responsible financial decisions. I like to appeal to my sense of competition for making good decisions. I just assume that everyone is out to screw me, so I constantly question if there is a better, more cost effective way to accomplish something.
Greg@Thriftgenuity recently posted…The Word “Afford” is Relative
Yea I like that mindset. I also constantly question if there is a better or more cost effective way. Unfortunately, many people use their sense of competition to accumulate stuff to show off…competiting for status symbols it seems.
I agree that you need to change your mindset. People want to start a race at the finish line. Everything comes with effort and time but no one seems to want to wait and think they are entitled to everything. I always question is this the right thing to do to get ahead. I’m i buying this because I need it or want it. Same goes for the car example you need transportation and a 10k car will get you there just like a 60k car. I changed my mindset by realizing I was following the majority. And quite honestly I don’t want to be in the majority and found that what the wealthy were doing was the opposite of what I was doing.
Thomas | Your Daily Finance recently posted…How to Curb Impulse Buying Habits
It is sad that the majority has a consumerist mindset. I agree that everything comes with effort but many people don’t want to make that effort. It does make a difference when you have your priorities in order and financial goals which causes you to always question whether something you’re buying is a want or a need.
I totally agree that it’s a lifestyle change. If you change your mindset, you can make a lot of long-term changes. On the other hand, going on a drastic “money diet” means that you’re likely to fail!
Holly@ClubThrifty recently posted…We’re Back….and Money Lessons from Mexico
Absolutely true, making a long-term change is always going to help you reach your goals rather than making short term changes.
You definitely have to change your mindset before setting out to cut expenses or budgeting, especially if you don’t like to do those things in the first place. You’re right in that if you see it as giving up certain things / making sacrifices, then you’ll likely want those things in the end (after you pay off debt or achieve FI). You have to be able to stay on the wagon. I see the diet analogy a lot and it makes sense. Some people will say paleo is a lifestyle, not just a “diet.” It involves every aspect of your life, not just what you eat. Like you said, Mustachianism is also a way of life – it has its own beliefs, which are at the core of everything they do.
E.M. recently posted…Do You Brown Bag It To Work?
Yea, I think that’s one reason MMM has such a big following. Changing your mindset really is significant and makes the journey a lot easier. I will admit that it is probably very difficult to reprogram your mind after so many years and so many advertisers/marketers influencing you/deluding you into thinking that you NEED certain things to be happy.
This post reminded me of another blog, called Real Sustainable Habits, that I used to read. It’s an important distinction between temporary sacrifices and a sustainable change of lifestyle. Like you said, without that change in mindset, how much progress can we really make?
Done by Forty recently posted…Budget Porn
Interesting…I’ll have to check that blog out. Thanks. I like your choice of words, “sustainable change of lifestyle.” It definitely explains the message I was trying to get through.
My money mindset has evolved over the years. I used to impulse buy and want the materials things that my friends had (even though I couldn’t afford them really). Over the last few years, I’ve started to appreciate frugal living, charity shops, getting the best deal and anything second hand. I see absolutely no shame in buying second hand goods. I hate paying full price for something now. 5 years ago, if someone had told me that we (the hubby and I) would be raising our daughter whilst taking a major cut in salaries yet still managing to pay debt off, I would never have believed it. But we are!
debtfreeoneday recently posted…July Debt Total Update
Great to hear that your money mindset has evolved and that you’re on the path to paying off debt! I definitely agree that frugal living and getting the best deal is something that should be appreciated and not shunned.
Whenever I cut expenses, I feel great actually! less of a load to carry, and I remind myself that I’m putting off today for a better future.
Troy recently posted…Why You Should Not Invest in Canada
Hey Troy, that’s a great outlook. I feel the same way.
However, there are a few tings I like to splurge on. I rarely ever cut food expenses, b/c every needs a way to relax (and fine dining is mine!). When it comes to clothes, I like Bill Gates’ fashion advice: buy 10 of the same shirt so you don’t have to worry about dressing up.
Troy recently posted…How Will Earnings Season Affect Stocks
Really…fine dining relaxes you? That is one expense that was easy for me to cut! Everyone is different though.
Couldn’t agree more with this. And I think Laurie’s post was spot on as well. There’s definitely a change in mindset that has to happen, though I think it’s a gradual process. You cut one thing, realize it’s not so bad, and find something else to cut. One thing at a time, and pretty soon you’re living a very different lifestyle than you were before. It’s not always easy to start, but it gets easier as you go and the rewards are definitely worth it.
Matt Becker recently posted…What is a Budget?
Changing your money mindset is a big step and most likely a gradual process. It definitely gets easier when you see the different it makes on your wallet. That is a big motivation.
I think you’re right. If you want to dramatically change your finances, you have to change your whole mindset, not just one budget rule. You need to dive in head first and change your life.
CashRebel recently posted…Retirement Really Is Sexy
Yep, I think so. if you just change a budget rule, it’ll probably just be temporary.
Definitely it is all in your mind and if you make it up then you can really live rich by changing your mindset. Making a little changes to your lifestyle can save you a lot. I totally agree with your points especially eating out where the food is good. No point in paying up heavy bill just because it is a fancy restaurant with nice decor
Once in awhile we might go to a fancier place for a special occasion, but not all the time. Eating out is expensive enough…I don’t want to pay even more for nice decor.
I really like this post. Unless you change your mindset, I suppose it’s just like you’re papering over the financial cracks rather than fixing the crack itself.
Adam @ Money Bulldog recently posted…Why have we stopped questioning inflation?
Thanks Adam. That’s a good analogy!
Once I got real about the difference between want and need my spending changed drastically. I let myself have wants but there’s no more fooling myself that a new shade of lipstick is a need. It’s helped keep my spending more responsible.
That’s good to hear. A lot of people still haven’t learned the difference between a want and a need. My sister volunteers teaching financial literacy at schools. The difference between a want and a need is a part of the 1st grade financial literacy agenda. If only everyone was taught this at a young age!
I have always been a saver but I’d say my mindset changed when I started to get a real job out of college and considering all the free time sacrificed to go to work in exchange for useless stuff. I cut even more to make an early exit.
Pauline recently posted…How I made $100,000 from Amazon last year
That’s great that you started so soon. I’ve also always been a saver too, and didn’t really spend much on useless stuff (well I tried not to). But it is not until the last few years that I realized that I wasn’t missing out by not buying all that stuff.
Another awesome post, Andrew. Yes, it’s definitely a mindset thing. For us, it was the realization that if “stuff” and keeping up with the Joneses hadn’t produced happiness in 16 years, it probably wasn’t going to ever produce happiness. We had to sit down and figure out what it was we really truly wanted out of life, and in the end, we decided that it was the freedom to make choices, and that in order to have more choices, we needed to get out of debt. Short-term pain, long-term gain kind of a thing. Difficult, but worth it.
Laurie @thefrugalfarmer recently posted…Save Money on Groceries: 7 Ways to Save Money on Food
That’s absolutely right…the freedom to make choices is so important. “Stuff” usually only provides short-term happiness…but sometimes long-term debt!
I am usually pretty selective with what I spent my money on – ie I bought a Honda Civic instead of my coveted Eclipse, I don’t have an iPad and my laptop is old and worn out. Lately I’ve been doing really poorly on the spending front, though.
Daisy @ Prairie Eco Thrifter recently posted…On Environmentalism Becoming Consumerism
Hey Daisy, I hope you weren’t too down when you purchased the Civic instead of the Eclipse. I actually find the Civic quite appealing and I think it is more reliable than the Eclipse (my friend had one and it had issues).
I really like this article. I have never really thought about the changes as a lifestyle change before, but I can see how it makes sense and rings true. I have just assumed that once out of debt people will be so relieved they will not get in to debt again, but of course, they may just see it as a clean sheet to be able to start buying all of the things that they have been deprived of in the past. This will certainly have an effect on my thinking with regards to getting out of debt in the future – so thank you very much!
turn one pound into one million recently posted…Thoughts on July Earnings
Thank you! That’s probably true to for somepeople…they know what it is to be in debt and never want to be in it again. But I think a lot of people who feel like they deprived themselves or sacrificed to their financial goals may decide that it’s time to reward themselves.
I’d even say it’s more than a mindset shift, but it’s also a willingness to challenge the framework you were given. Very few people have the mental strength to think outside the paradigm they live in day-to-day. When you break free from that way of thinking, possibilities open up before you.
Pretired Nick recently posted…Pretirement story: Making the move to Mexico
This sounds like the Matrix! It really does take a lot of mental strength and self control to think outside the box and live a different lifestyle compared to the majority. But as you said, it is freeing when you are able to think that way.
Pingback: What Can Pawn Shops Teach Banks (and Us) About Risk Management? - Mom and Dad Money
I love the idea of a lifestyle change vs. a diet! That’s a great analogy. I have long thought that getting out of debt and losing weight are closely related!
Thanks! I got the analogy from Laurie from the Frugal Farmer…can’t take credit for it. The two really do have a lot of similarities.
Pingback: Aspiring Blogger – Personal Finance Carnival #12 – August 9, 2013 | Aspiring Blogger
Pingback: Why Aren’t You Saving for Retirement? | Living Rich Cheaply
Pingback: The Best Personal Finance Tips of 2013 | Debt RoundUp
Pingback: Living Rich Cheaply: Have Your Cake And Eat It Too! | Living Rich Cheaply
Pingback: In Defense Of The Latte Factor | Living Rich Cheaply
Pingback: The Secret Recipe To An Extremely Early Retirement | Living Rich Cheaply