True financial freedom is all about being able to do what you want with your money. It’s not waiting for retirement.
It’s why I wrote The Root Budgeting System and why I manage my money the way I do—and teach others to do the same.
Think about it.
If you spend your money the way you want, manage your money the way you want, and make sure that you are using it to build a life that you want, you are much more likely to stick to the plan.
So let’s start with spending.
The ultimate goal for most people is to be able to spend how they want, whether that’s on lattes every day, a home where they want, or traveling.
If you want to be able to protect the way you’d like to spend money, here are seven things for you to do.
1. Don’t Get Yourself Into Too Much Debt
Debt is not the enemy like most finance gurus preach—but that doesn’t mean you want to take on a bunch without a plan.
I believe it’s ok to take on a little bit of debt to finance an income-generating asset like a rental property. It may even be ok in some cases to take on some unnecessary debt if your cash flow is secure.
But taking on too much at one time will give you no breathing room.
Debt without a plan is the quickest way to lose control of your finances.
It will keep you from being able to spend your money how you want.
On top of that, the more debt you take on, the more you will have to take money from your other goals and spending categories to pay for all those monthly payments.
In general, keep yourself away from debt—especially unnecessary debt—and you’ll be able to spend money how you want.
2. Get Help When You Need It
Many people get so ashamed of needing help that it becomes a dirty phrase—something they won’t utter in public.
Getting help—needing help—and then asking for it is actually a show of strength.
It’s you admitting that you don’t have all the answers and that you’re taking your financial improvement seriously.
That’s something to be admired!
So invest in yourself to get the help you need.
Having a financial coach (like me!) in your corner will:
- Provide a judgement-free environment for you to learn
- Hold you accountable so you actually make the changes you want to make
- Help show you the ropes in a shorter amount of time
- Cater your financial development to who you are and where you want to go
Hiring a financial coach is one of the best money moves you can make.
But even beyond that, there is more that you can do.
Buy finance books. Watch a bunch of YouTube videos on finance. Read a finance blog.
There are a ton of things you can do to learn and grow financially. And it will help you spend in a way that aligns with who you are and ultimately build the life you want.
3. Become the Real Definition of Frugal
Frugality has gotten a bad rap over the years to where people don’t want to have anything to do with it.
When someone thinks of being frugal, they automatically think of “deprivation.”
They think that being Frugal is the opposite of spending how you want. They think it’s limiting.
That is not frugality.
Think of frugality as being intentional with your money.
It’s making the conscious effort and decision to stop spending money on things that are not serving your goals and spending more on the things that are.
If you’re feeling deprived by being frugal, you’re doing it wrong. (Or maybe you were taught wrong.)
Being frugal is the art of spending your money on what you value. I call it art because there is no wrong way to do it—only a wrong way for you.
If you value that morning latte, then find a way to spend your money on it every. freaking. day.
Without guilt or shame, allow yourself to spend that. That’s frugality.
And that brings me to my next point…
4. Figure Out Exactly What You Value
If you’re going to spend money on things you do value, you’re going to need to figure out exactly what those things are.
When you know what you value and spend money how you want on those things, it’s fulfilling and you stop binging on stuff you don’t actually want.
Ask yourself these four questions:
- How much time do/will I spend on this?
- How much do I enjoy doing this?
- Is this something I enjoy sharing with others?
- Does/will it continue to create value?
These questions are a great starting point for figuring out what you value.
If what you’re spending money on doesn’t fit any of the criteria above, you can confidently cut it out of your budget.
If it’s something that you enjoy sharing with others (like going out to eat) but you don’t really enjoy it alone, you can find the appropriate money you’ll need to set aside for going out to eat with others.
Determine your values and it’ll allow you to spend how you want.
5. Only Spend Money on What You Value
In order to spend money the way you want, there is one area where you need to stop spending—and that’s on what you don’t value.
If you’re spending money on things that don’t serve you, you’re not going to have money to spend the way you want.
So cut those things out without thinking twice about them.
When you cut out the things in your budget you don’t need, it frees up more money to spend on the things you value.
You can truly spend money how you want when you have the money to spend on your values.
So go through your spending categories. What doesn’t serve you anymore?
Is it that Netflix subscription you no longer use because they’re not the only player in the game anymore?
Is it the video games sitting on your shelf that you haven’t even played yet?
How about the monthly gym membership that you haven’t used in ages because you’ve found a better way at home?
After figuring out what you value, get rid of the things that you don’t.
6. Set Up the Right Budget for You
Do you want to know the best way to stick to a budget?
Use one that’s tailor-made for you. Plain and simple.
There are plenty of different methods out there that you can copy and paste into your own life, but chances are they will only work for you for a short time.
Why? Because they weren’t made with who you are in mind.
That’s why I created the Root Budgeting System. It’s a system that shows you how to create your own method so you can actually stick with the plan
Budgeting is another personal finance mainstay that has gotten a bad rap recently.
I can guarantee that if you don’t like to budget, you’re doing it wrong. Set up your own budgeting method instead and enjoy the fruits of your labor.
7. Invest So You Can Spend in the Future
It may not seem like it with how volatile the stock market is right now, but it’s still one of the best and easiest ways to invest for your future.
The absolute best way to invest in the stock market is through index funds. An index fund follows one or all of the stock market indexes and usually has a rock-bottom expense ratio.
An expense ratio is the percentage of your portfolio the broker takes to manage your account expenses. An index fund is passively managed, which means it takes almost nothing for the company to manage the account. Hence, the low expense ratio.
Use dollar-cost averaging to continually invest into one or more index funds over the long term and compound interest will help ensure you are set for retirement. Use these steps:
- Figure out how much you need to retire. Most experts recommend retiring with a portfolio that will generate 80% of your yearly salary when you retire.
- Multiply that number by 30 years. Multiplying by 30 will ensure you have more than enough even if you happen to live until you’re 95 after retiring at 65.
- Use a retirement calculator to figure out how much you need to save starting right now. Since there are so many variables, this will be different for each person. That’s why it’s best to use an online calculator like this one at smartasset.
- Automate your investing. I don’t call it one of the three pillars of budgeting for nothing. Automate your investments and watch your money grow.
Investing like this does two things. First, it makes it ridiculously easy to invest.
Statistically, you actually get better returns by investing in a passive investment vehicle like an index fund. You don’t have to worry about timing the market either.
Second, by investing now, you guarantee that you will be able to spend how you want in retirement as well.
Spend Money How You Want
Spending has been a bit of a taboo topic in personal finance for many years. Even bloggers and personal finance experts tend to focus on saving and paying off debt.
But you have to learn how to spend in a way that will work for you if you want to be financially successful. Otherwise, you’ll find it hard to stick to your goals and to feel in control of your money.
Use these seven tips to spend how you want, and then re-evaluate your spending regularly to keep spending on what you want.