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How To Save Money, Invest, Pay Off Debt, Travel and Still Live The Life of Your Dreams

Wealth Building Source: stck.xchng Photo: svilen001
Wealth Building Source: stck.xchng Photo: svilen001

Chances are, if you’re reading this blog you’re already well on your way to being more in control of your finances.  You’ve probably read a personal finance book or two and maybe you already have your own home business and some non-registered investments for the future.

We all know what we need to be doing to get our financial act together; the problem is doing it. The problem is that there is so much to do.  It can’t happen overnight.  Yet sometimes we’re impatient and we take actions which we unconsciously think will get us to where we want to go, faster.

Examples: coming into some extra, unexpected money and putting it all on your credit card; getting a pay raise and deciding to put it all into an investment; finding out that your credit card company bumped your rate up, so now you’re not going to see any more movies or eat out again until you get that debt paid off.

You aren’t going to get ahead by privileging one component of your financial health above all others. It’s such a simple point, and it can take a long time to sink in.  The path to financial health is BORING.

I’m assuming you don’t want to have a six-figure income if it means you’re also one million dollars in debt.  I’m assuming you don’t want to have all your debts paid off by the time you’re 70, only with nothing left to retire on.  The only way to be debt-free and swimming in cash flow so that you can retire early and live the life you want is to tackle ALL of these problems at once, bit by bit.

  • Long-term buy-and-hold investments only work if you start them early enough.
  • You’ll pay less interest on your loans and credit cards if you pay them off sooner rather than later.
  • The sooner you pay off your mortgage, the sooner you’ll free up your expenditures.

These things all need to happen sooner rather than later.

The problem with solving one of these leaky faucets at the expense of the others in the short-term is that pretty soon you’ll be forced to attend to the other, and you will sabotage the forward-momentum you achieved in taking care of your debt, for example.  The analogy I like to use is that of keeping a rowboat steady.  You don’t want to rock it too far in one direction if it just means you’re going to fall into the water again.

Solution: Imagine you’re already as wealthy as you need to be.  Imagine you are free from all finance-related stress.  Now think in reverse to envision what allocations of capital got you to this stress-free financial place.  In other words, what balance of capital inflows and outflows do you need in order to balance your obligations with what you need in order to get to where you want to go?  If you have $1000 in monthly debt payments, $1000 in monthly shelter payments, $1000 in living expenses, and you also need $500 for your investment fund and $500 for a future travel fund, you need to find a way to pay all of this each month just in order to stay afloat.  You can’t let one “money channel” fall behind, because it will just mean that you’re sabotaging the progress of another “money channel” in the future. You also can’t forgo developing the money channels you will need in the future, because then you will never make room for them in your portfolio.

Sounds pretty basic, and it is.  But it’s the subtle shift in perspective that’s important.  Rather than think of your financial obligations in terms of balls you have to juggle — on which view you can only hold onto one at once and it’s the balls that are really controlling you — think of it as a pie that you slice up each month.  (Apologies for the awkward metaphors.)  You’re in control.  The difference is that each month you start with a full pie.  As you become wealthier, the size of your pie will grow, but you will always start each month with a full pie.  So how do you want to cut that pie up?

The trick to pay off debt, save money for Costa Rica, buy a second home, and still sock cash away for retirement is to do ALL of these things all at once.  You need to make room in your portfolio TODAY for everything you want to achieve and have in the future. That includes finding ways to keep that monthly pie growing.  You may feel broke today, but just remember that you always start each month (or each new paycheck) with a full pie.  Don’t give half of it to Mr. VISA only to starve Ms. Costa Rica, because later on she’ll be stealing from Mr. VISA again just to get even.

9 Responses to How To Save Money, Invest, Pay Off Debt, Travel and Still Live The Life of Your Dreams

  1. Although you say ” don’t give half of it to Mr. VISA only to starve Ms. Costa Rica” for me personally I would rather pay off the VISA card which is charging a wickedly high interest rate instead of saving it and earning a pathetically low interest rate for it.

    Pay off the debt first I say, coz if you don’t pay the debt first your going to get further in debt.

  2. I like the logic behind the need to look ahead at what you are going to need to look back and figure out exactly what you need to do in order to achieve these goals. Too many people don’t analyze thoroughly enough and then they expect an outcome that is unrealistic. Thanks for you insight!

  3. This article is very on point and the more you diversify funds, your financial well being, the better your life, financial and other wise you will be.

    The other key to moneyenergy is to know that money is energy, the more you keep the flow going, the more you will have. When you learn how to invest, make more money and teach others how to do it, the more money you will have flowing into your life.

    Learn how to create multiple streams of income is also a major key to keeping the flow going.

    Besides your job and other investments, learn how to create multiple streams of income via other opportunities.

    Make It A Great Day Everyday!!

  4. Great article. People need to start thinking long term with respect to saving and investing.

    There is no quick fix. So, perhaps everyone will learn that fun that can be had in saving money. You win the game when you have cash in your pocket (and your bank account)!

  5. This post makes sense from the perspective of burnout. People do need to splurge ocassionally to let loose. Most people aren’t robots so they can’t treat thier finances that way either.Too much emotion gets involved.

    There should be incentive and manageable goals along the way that are built into the budget so you feel good about doing both. I do this by having a “fun” account and a “debt paydown” account. If I stick to the budget I’m able to live the best of both worlds. Simple stuff really.

    Ryan @ Plantingdollars

  6. I would also pay my Visa card in a heartbeat. Why paying so much interest when I earn 0.1% in a Savings account?

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