An Equation for Peace of Mind

Today I am going to address something that affects all investors everywhere. Fear. If you are like I was when I initially started investing, fear is what’s keeping you from moving forward in your investments. I am a worrier by nature, so it is very easy for me to fill my head with “what-ifs”. What if I lose my job, what if the Walking Dead plays out in real life, what if the economy tanks. Believe it or not, you are more in control of these events than you know. The answer to these “what-ifs”, that may or may not keep you up at night, lies in living today as if these things already happened. It just might happen that when you start living below your means, these new actions will become habits, and eventually open the doors to so many new possibilities. Let me explain.

One of the biggest fears that I have had in the past is the age old “what if I get laid off”. Although it was not an immediate threat to me and although I had 12 months of emergency funds saved, I still constantly worried. I decided to do something about it. I thought about how if I lost my job, I could make my emergency fund stretch for longer than it was intended. I decided to put it to the test and start living conservatively today, just to see if I could. I automated most of my investments and savings so that whenever I received a paycheck, 70% of it would be invested into other accounts. The remainder is what I used to live on. If you are going to try something similar, I would suggest starting at something reasonable, maybe 40-50% and increasing that amount monthly until you start to sweat a little.

After a month or more of living this way, it starts to become habit. For me it is a game of sorts – just how little can I live on (without sacrificing my quality of life)?  If  you are in debt, this may be less exciting but just think, eventually all of that money you aren’t spending is a big fat paycheck to yourself (hopefully one that pays dividends, and gives you the peace of mind to live without saying “what-if”). I initially automated my investments in order to achieve that peace of mind, now after a few years of growth and continued investments, I have bigger and better plans for that money including retirement, a jaunt through Europe, starting a family, an investment home. The possibilities are truly endless-and anyone can do it with a little discipline and the ability to determine wants vs. needs.

An easy way to start in this journey is to track your expenses. For each purchase, you should clearly mark whether it is a want vs. a need. As you learn to say no to certain purchases and your savings rate becomes larger, you can begin to hone in on your needs further and determine how you can save even more money. For example groceries would be considered a need, but are you shopping at Whole Foods or Aldi, could you clip coupons, is half of your grocery bill dedicated to beer, etc.

The second component to this is increasing your income. The idea of this is to do something on the side that you enjoy. As you learn and grow your side hustle, you just may find that you no longer need the nine to five.

The combination of cutting expenses and increasing your revenue is a constant battle but one that you should find enjoyment and instant gratification out of. Make it a goal to start today and you will quickly learn that it isn’t as difficult as it seems.

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