How to Control Your Spending Habits to Achieve FI

So this is my first blog post, and while I’m still a newbie real estate investor and just started my FIRE journey, I thought I’d write about an interesting observation I recently noticed.  A typical weekend for me in my 20s would consist of buying electronics from Best Buy, new clothes to look fresh for the week (when I was single), and splurging the rest getting drunk at the bar with friends.  The last one was always the most costly, and I never had anything to show for it at the end of the week, constantly broke.  But after making up my mind to become an investor, I found a major paradigm shift in my thinking.  Suddenly, buying a $25 shirt became a huge deal to me and I started becoming extremely frugal (well...sorta except for the social lunches with coworkers that still cost me about $10/day).  Everything that didn’t meet my investment goals were pushed aside and all I can think about now is how to generate more income.  Luckily I no longer go out drinking on a regular basis, but even when I do go with friends, I rarely order more than 2 beers.  

All this planning is great and all but I started become curious as to why I’ve become so frugal.  Why only now, after years and years of living paycheck to paycheck could I finally begin saving like I always said I would?  I began realizing that the reason for all this is because I now have a goal much bigger than just wake up, go to work for 10 hours, come home eat dinner, watch the news and go to bed only to do it repeatedly everyday.  I believe that most people do not have large life goals, I mean sure everyone says the same answer “I want to travel the world”, I’ve said this for years and still say it today, but seriously how many of your friends are saying “I want to own 100 houses”?!  Most people are only thinking of paying off their primary mortgage in 30 years, or worse, how to buy their first home.

With no large life goals, everyone falls into this trap of spending their hard earned cash on things to make them feel emotionally satisfied.  What do I mean by this?  When you don’t have a large, ambitious goal and large enough why, what’s the point in saving your money?  Most people would rather just spend it now to feel like they rewarded themselves for working so hard during the week.  Then later get slapped with an unexpected car repair that will cost $500 and spend the next month eating packaged ramen for dinner!  I hear this story ALL the time.  Smart people spend their money so foolishly...and even worse, sometimes people spend it on useless items that still have price tags on it.  Which brings me to my next point.

Sales are your worst enemy.  This is a common phrase I hear: “It was just so cheap, I couldn’t pass it up!”  What many people do is spend more money during the sale than they would have during a non-sale event.  Let me say this again, people commonly spend MORE money during a sale event than a non-sale event.  Does that even make sense?!  The rationale is always “I saved SO much money!”...by spending more money....?  What I find is that many times people will not only spend more money, but the items they saved so much on end up sitting in the closet with the price tags still on them for months, sometimes  they’ll even donate it to Goodwill!  So yes, you saved a lot of money to donate it to Goodwill.  Sales trick us into thinking we’re getting a deal, but in reality - THERE’S ALWAYS A DEAL.  

I’ve since come to ask myself these questions every time I get the urge to spend:  

1. What value will buying this product or service bring me?  Will this make my life easier, make me twice as productive, or allow me to generate income somehow?  

2. Is this product a necessesity?  When I say necessity, do I use this product on a regular basis where spending it in bulk at a cheap price makes sense because I will always use it? These would be things like toilet paper, toothpaste, pet food.  

3. Do I need this product right now?  Or can this wait?  The less you spend today, the more you have for tomorrow.  There’s too many times where I find I spend my money today on items that aren’t that important, only to find a sale tomorrow and spend double the amount.  

4. If this is not a necessity, do I love this product?  And when I say love the product, I mean, I would immediately start using it.  If it’s a shirt, I’d want to walk out of the store with that shirt on right now and I’d be wearing it at least once a week til several holes developed in the shirt before giving it up.  

If at any point in time, I find myself waivering in any of these questions, I immediately walk away because I realize it’s not a necessity, does not bring value to my life, is not immediately needed, and I don’t love it.  Remember the first thing you should do is make a huge goal for yourself, or as Grant Cardone says, 10X your goals!  This way, you’ll always remind yourself when spending decisions do not align with your life goals.

Hope you all find this helpful in your own shopping habits to get you on the path to FI.  

Aloha,

Chivas