At some point along my financial independence journey, saving money became fun. It was like a game, and I love winning games.
What else can I optimize? Where else is there waste? Is my portfolio optimized? Is this the best place for me to live? Can I get rid of my car? The wife nixed that one, by the way. On and on, anyway to try and get there faster. And it was so rewarding to see my net worth grow, our expenses shrink, and continue playing the game.
Saving money did not always feel this way, however.
For me, I felt a lot of guilt around money. I was making a good income and saving a lot of money, but when I treated myself to something nice or went out to eat every once in a while, I would feel a sense of guilt. I was always dealing with buyer’s remorse. I could have saved even more, what was I doing? And this is when I was already saving 70-80% of my income every year. This obviously isn’t healthy. I wasn’t able to enjoy the money I was working so hard to earn. Yuck.
I tried a new approach instead. Every year, I would set an aggressive net worth goal to reach by the end of the year that equaled around a 70% savings rate for the upcoming year’s income. Without realizing it, I had implemented a popular strategy called “Reverse Budgeting”. Pay yourself first, and you’re free to spend whatever is left over.
So I was doing this for years before I very recently learned there is a term for this. Early on in my path to financial independence, my wife and I stopped using a budget. Budgeting only helped to reinforce the guilt I felt around spending money, and it made the process of saving and investing quite painful. It felt like deprivation. The process of making a budget is generally filled with very negative language and negative thinking. It’s that scarcity mindset again.
However, with this new Reverse Budgeting approach, I found it became fun. The language and thinking became positive. I was working towards something, rather than trying to deprive myself of something. I was focused on the goal itself, watching my net worth grow. It felt good to deposit money into my brokerage accounts when my paycheck came around.
And whatever was left over (which wasn’t much, because I had so much fun putting money into my 401k, my investments, etc) was mine to spend how I wanted to, guilt-free.
So now what?
If this is resonating with you at all, I would suggest you set a game plan.
Figure out where you would like to be a year from now, whether that’s paying off debt, starting a college fund, or saving for retirement, and write that number down somewhere. Put it somewhere you can easily reference and that’s regularly visible (post-it note on your mirror?).
Figure out how you’re going to track your progress. If it’s pay off debt, it could be an app or account login. If it’s growing your net worth, I suggest downloading Personal Capital (no affiliation, just like the product).
And when that next paycheck comes in, pay yourself first. Check in with how you feel. Notice anything different? I sure did.