This is the most important part of the Secret Equation. It is also the most difficult to do because there is a 200 billion dollar industry working directly against you. The next time you go anywhere or do anything, take note of all the advertisements you see. On TV, billboards, in newspapers and magazines, on Facebook, Twitter, Snapchat, and Instagram. They’re everywhere! All using refined strategies to make you part with the money you just earned making pizzas at Domino’s.
My favorite way to reduce my spending is to imagine the lifetime of cash the money would make if I invested it instead of spending it. For example, I could buy a brand new iPhone 7 for $700 and my net worth would go down $700. But if I invested that money, after 10 years it would increase to $1,377* and my net worth would be that much higher. So instead of losing $700 I now have $1,377, which is a $2,000 difference!
If we take that $700 and invest it for 20, 30, or 40 years, the numbers start exploding. If I were to retire at 65 then take the money out, the $700 would balloon into over 14,000 dollars!
Of course, this method might not work for everybody. We will discuss more ideas on how to save money later! But for now, simply be aware of what you are spending. A lot of people don’t put any thought into their outflow of cash, so if you consciously think about it you’re already doing pretty well!
*Calculated using a 7% return. We’ll get to the details about this when we talk about investing.
(Pictured: Me enjoying a 100% free walk in the woods. Mora, MN December 2015)