Do you want to save money live better but you often feel like it’s a choice between one or the other? You can do both but saving and investing money towards your future now is more urgent than you might think. However, in my opinion it’s not a simple choice of do you save money or live better, you can do both, at the same time.
There are some major reasons you need to focus on saving now rather than defering. Whilst I agree with the Carpe Diem philosophy (seize the day), getting your house in order comes first. We need to setup the crucial financial foundations such as our emergency fund and the money habits that will give us more money for life. This is going to help us relax, enjoy life and naturally pull in more money.
However, delaying saving and investing by just a few years can have a significant effect on your future finances. By contrast, if you aim to save money and live better in the present you’ll be impressed by the results In my experience not only will you have enriched your quality of life but you’re well on your way to creating passive income.
Fast-forwards to 20 years in the future and you could have enough passive income to never have to work again. This is because it can give you the freedom to pursue your passions under no obligation from an external party.
Disclaimer: This is not financial advice. You are responsible for your own financial decisions. This page may contain affiliate links.
Andrew | Mr Money Side Up
#1 Saving Today Means You Won’t Have To Work So Hard In The Future
The earlier you start saving and investing, the easier it is to achieve financial success. This is due to concepts such as compounding. The more you plan, the easier it is to design and implement a lifestyle later on in life. Therefore, the easier it is to build a passive income later on in life. However, delay investing and it will undoubtedly cost you, as you will see in the below example:
- Person A. Starts investing at 25 and invests £200 per month.
- Person B. Starts investing at 35 and invests £200 per month.
The Results At Age 55 (assumes 7% average per year return from the stock market)
- Person A. Invests a total of £72,000 with total returns of£235,212.97
- Person B. Invests a total of £48,000 with total returns of £102,081.21
…..The interesting part:
- Person A invests just –£24,000 more worth of deposits.
- Those 10 years results in a portfolio difference of £133,131.77 between Person A and B.
- That’s an extra +£109,131.77 after the -£24,000 is deducted!
This 10 years of extra planning has allowed for an extra £100,000 worth of lifestyle. At a withdrawal rate of 4% per year, that’s an extra £4,000 a year. Returning that extra £24,000 investment in just 6 years!
You Don’t Need To Have A High Income
If you want to read about my financial plan when it comes to investments click here. This will show you a real life example of how I plan to grow my investments. At the time of writing this post, my portfolio is worth around £25,000 and this could generate a passive income of £83 a month.
All of this highlights that you don’t need to earn thousands of pounds or dollars a month to achieve the passive income dream. Look at the porfolio values above, from just £200 a month!
Based on your expenditure and how soon you want to implement a passive income this just needs scaling up. You can run your own calculations using this Compound Interest Calculator Tool.
#2 Saving Money Can Allow You To Live Better
I’m going to try and hold myself to the following statement: “Don’t just aspire to make a living, aspire to make a difference” – D. Washington. Accumulating the financial resources and skills you can gain along a financial journey permit you to do this.
There are so many examples in the world of people who have saved enough money to live better. In the personal finance niche you have Kristy Shen at Millennial Revolution or Tanja Hester at Our Next Life, both of who now follow their passions after escaping the 9-5. They did this by implementing long-term solutions to passive income. They now travel the world and pursue passion projects such as writing books. You can find more examples on the Blogs We Like section of this blog
Another example is Tim Ferris, author of the 4 hour work week. Who after replacing his active income with passive income, now pursues anything and everything that he finds exciting. He has a couple of great Ted Talks I would recommend watching if you fancy getting a flavour for his style of thinking:
#3 Save Now To Help Other People Live Better
I recently came across the example of Dane Maxwell and The Foundation. By resolving business’ key pain points by implementing software solutions he now teaches other people to do the same. Helping them escape their office cubicles and 9-5 jobs with passive income streams.
You can also look on the billionaire scale at people like Bill and Melinda Gates who have to date donated$36 Billion to charity as of August 2018. However, the Frugalwoods highlight that you don’t have to be a billionaire to give like one. A 70-82% savings rate, index funds and a revenue generating rental property, this permits them to fund a number of charities. Proving that you can be frugal and charitable.
4. The Differed Life Plan Is Pessimistic
The approach of slaving away for the best years of our life, only to retire and fade is saddening. Many people defer thinking about retirement because this makes them consider this fact. One way to start resolving this is to ask what would we do if we weren’t working for a salary. Pose the question as such, “what would I do today if I won the lottery?”
This melts peoples brains, including mine.It’s difficult to imagine what you would do with such a surplus of time. However, this is important for actually getting to this point in the first place. If you have no real reason to save, why would you do it? On the other hand if you can retire ASAP, this may push you to find higher sources of income, become more frgual and generate passive income. Here are some things I would do more frequently, if I never had to work again or even if I had more time now.
This is what motivates me to save more in order to live better:
- Spend more quality time with family & friends.
- Travel & live in other countries.
- Learn the language of these countries.
- Blogging & writing.
- Practice new skills daily such as surfing, scuba diving, brazilian jui jitsu.
- Charity work andPhilanthropy
- Increase time spent in natural settings (e.g. below image).
I have also previously written about how time scarcity can have a negative impact on health. In this context, I made the point that buying time can improve this situation in the context of health outcomes. However, in this post, I feel it’s also important to highlight that having more free time can also improve the quality time you can give to those around you. If you are working 40+ hours a week and draining you attentional span this is limiting the quality of time, in addition to how you can use the free time you have.
5. Save Now To Help Future Generations Live Better
Shifting to thinking about money in terms of passive income gives you a new perspective. Building a sustainable and renewable source of income has implications for how you might pass on money.
If you are maintaining a safe withdrawal strategy of 4%. It is highly likely that you will maintain or even grow your portfolio value. This offers the possibility of passing on income-generating assets. Rather than saving a separate fund of money to pass on you are simply engaging in the healthy behaviour of withdrawing at a safe rate.
I know what you are thinking already. Do you really want to create a trust fund baby? Do you really want to facilitate laziness because future generations might not have to work? Of course not. However, there is evidence to show that once a scarcity mindset is removed then intelligence can grow and people can flourish. In one particular study, researchers reviewed the IQ of sugar case farmers who earn the bulk of their income after the harvest.
These farmers scored the equivalent of10 IQ points less before harvest compared to after harvest. This type of finding has been replicated in other scenarios too. The fact of life is, that bad thing can happen. People lose their jobs, suffer illness etc. Wouldn’t it be nice to ensure that future generations could always pay for decent accommodation, healthy food, and an education?
15 Ways To Save Money And Live Better Now
You can’t argue with the benefits of saving money now to live better in the future. However, like I said earlier you don’t have to choose between the two. You can save money and live better now. It all starts with more concious spending and understanding the return on investment between your spending and your wellbeing.
Avoiding spending money or using restrictive financial diets are doomed to fail. They will only make you miserable. Rather emphasise your spending on the things you value and cut out what you don’t. In order to do this you will need to put in some work upfront. Build an excel/google sheets budget and track your spending with innovate money apps. Cancel your gym membership and use free exercise tools (or get paid to exercise
- Cut your bills with price comparison sites or the Snoop app. Snoop reckons it can save a household £1,500.
- Take up a side hustle or focus on passion projects (e.g. start a blog). This can be more fullfilling that spending.
- Earn cashback from your spending on groceries or even your favourite brands with a Curve Card.
- Make saving more fun and interactive with the fiesty Cleo AI chatbot app.
- Fast-track your money with a budgeting and savings app.
- Cancel unnessary subscriptions.
- Plan free activities that involve nature and excericse.
- Focus on buying experiences above all else.
- Learn how to focus your spending on what you value.
- Get off the hedonic treadmill of spending.
- Use the 50/30/20 budgeting rule.
- Automate your savings and do this one thing each pay day.
- Learn some strategies for controlling your impulses and stop spending.
- Read about the lifestlye changes which increase your wealth by $110,000
- Boost your income by 5% with these 15 lifestlye hacks.
The Number One Reason To Save Money And Live Better Today.
Getting into the habit of saving money while young is going to set you up for life. There are 12 habits in particular that can help you to live your best life. By building strong money habits you will be able to live in sustainable abundance with confidence that you can sustain your lifestyle.
One of the main reasons I aim to save money and live better is because I feel I can buy things I need and want without feeling guilty. Many times in the past I wouldn’t spend money because of the price tag or because I felt I needed to restrict myself. Once you have a strong budget and the discpline to match you will feel more responsible. As a result, you’ll feel more entitled and able to treat yourself or others.
In the event of a financial emergency you don’t need to bother someone to borrow money because you have your safety net or an emergency fund. However, should you want a loan or credit to cover an expensive purchase you’re great credit score is going to help with hassle free and quick approvals from banks.
Ultimately, you can live longer and healthier because you are stress-free about your financial well-being and take care of yourself. By reaching financial freedom you’ll have more time to help others in need or focus on the activities you enjoy. Lastly, you can build wealth and live a legacy for your future next generation.
