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Why I’ve Deliberately Increased Expenses To Move Towards Financial Independence

If you start saving more, you are doing the FIRST step towards financial independence.

It is correct. And also conventional wisdom.

Most "FIRE GURUS" advocate being frugal and to save at least 50% of income. Why?

Because a savings rate of 50% (With an assumed investment ROI of 5%p.a), it allows you to possibly reach financial independence in 17years.

BUT only cutting back on expenses to save more is the lazy way to attain FIRE (Financial independence retire early).

Frugalness has limits to helping you reach financial freedom

Look at the equation again...

** INCOME - EXPENSES = SAVINGS **

You can keep cutting back on expenses, even to $0.

It's theoretically possible to live off your parents and be stingy until 100% of your income is saved.

Want to hear a cool story on frugal minimalist, check a popular reaction video I did previously...

But once you've reached 0% expenses where to go next?

The answer lies in increasing INCOME.

That is where it is HARD! Really HARD!

Cutting back on expenses can easily be done today but increasing your income takes work.

It is dependent on your market value.


Remember, two people saving 50% of income but one at $2,000/m saved and one at $10,000/m saved get to vastly different levels in total saved amount.

Where the "B" and "I" think differently from the "E" and "S"

You may have seen Robert Kiyosaki's explaination before. Image above.


In the E and S quadrant, the focus is on total income.

To put it simply, it is INCOME for TIME SPENT AT WORK.

An employee sits in office and clears work given.

Self employed GRAB drivers trade time for income by sending passengers.

It is often hard to impact income and make it bigger.

In the B and I quadrant, the focus is on income/time spent.

Especially for the business owner, where time is spent is carefully measured. 

The choice is often NOT THE LOW COST DIY SOLUTION.

That is why professionals are hired and services are purchased.

Only activities with the most impact income/time is attended by the business owner.

That is how income can be grown to a significantly higher level.

Same thing for "I". Time is preciously needed to master and manage investments.

Where expenses have been increased these days

I've kept income/time in close focus on decisions made. Hence, these are changes over the past year.

1) Increased transport costs

Previously, I took 5-10min detours to avoid a $1 ERP. Now I go straight through for the shorter route.

Previously, I parked at open air carparks and walked 10min to save $3 but now I pay parking charges to save time.

There is a logic why Cristiano Ronaldo and Lionel Messi fly in a private jet.

2hrs more to clear immigration customs mean 1 less commercial which is easily worth thousands of dollars to them.

Source

Quick story: I was driving past parliament when a minister (without naming who) stepped out of his white BMW5. His chauffeur had just dropped him off.

But of course, you and I may not need a chauffeur today but you get the logic on respecting time better to get to financial freedom?


2) Increased staff costs

I've gradually embraced the concept of hiring. Tim Ferriss explains it best in his book 4hr work week.

The key concept is to "pay and delegate" not DIY everything.

For example, you can hire a maid which technically is also increasing your staff cost.

With the saved time, you teach your kid reading instead of spending at some $100 a session enrichment class.


I've actually a close friend who hired a maid to do his housework.

But he just used his new found time to play even more POKEMON! #palmtoface


3) Increased budget for healthy food

Healthy food is NOT fine dining. Going for fine dining to me personally is just lifestyle creep.

The healthy food I spend nowadays are Golden Kiwi ($5.95/box), dark chocolate ($4.50/packet) and vitamins (depending but >$20).

Golden Kiwi if I'm not wrong is the highest in Vitamin C and dark chocolate is rich in antioxidants.

Getting more energy and not getting sick is important and MONEY WELL SPENT!


For restaurant dining, I'm still actively using BURPPLE BEYOND for my restaurant meals to save cost.

In the post below you'd see some really nice cafes and a referral code.

Check here for BURPPLE BEYOND POST AND Get A REFERRAL CODE!

What can TIME that is now earned back be spent on to get you MORE INCOME?

Maybe you've always thought of doing a post-graduate course. Something that could help your career years down the road but didn't have time.

Maybe you've thought of doing a side hustle but didn't have time.

If spending $1 more in transport saves you 5min, that's $12/hour. If your side hustle gets you more than $12/hour, maybe you've grown your net income more now, agree?


Some other worthy things to spend time on include putting time to study investments  and networking.

network

"Income/Time Spent" and the impact to your financial independence journey

Attaining financial independence is really not difficult. 

If you are thinking of freeing more time for yourself to build assets or do more deals, consider adopting some of the above expenditures I've mentioned.

This sharing is really on understand the factor of "INCOME/TIME SPENT" towards financial freedom. Expenses are needed to get more time.


If you'd like more strategies on financial independence or FIRE, check the following.

The first is a step by step video to explain how to calculate on it.

In it you'd understand the 4% withdrawal rule for financial independence.

PS: Give a like to the video, it would mean the world to me for putting it together =)

Beyond that, I've this previous blog post for you where I shared on the secrets of attaining fatFIRE.

Not sure what fatFIRE is?

Check this post Financial Independence And The Secret To Achieving fatFIRE!

See you there....

Last updated on October 15th, 2019 at 12:39 am

Josh Tan Jian Liang (CHFC) Principal Author

REVIEWS: https://www.josh-tan/wall-of-reviews. Practising financial planner with Promiseland Independent Pte Ltd. EXPERIENCE: More than 12years. Josh Tan is a young parent, speaker, author and founder of TheAstuteParent.

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