Why is it so difficult for us to budget and save? Why do we use scapegoats like inflation, price increases, and wage stagnation to deflect?
The simple fact is that we must count every penny that enters and leaves our homes. That’s the only way we will build wealth and retire early.
But somewhere along the lines, budgeting became a bad word. How dare we control our spending after working so hard to obtain our income?
Think of Preferred Shares as Gift Cards
Rebelling against saving. There is an undercover narrative that speaks to our children about the joys of spending. I am going through it with my 17-year-old son now.
My son has been working for almost a year and has saved $1,000. Every time he receives a paycheck, we discuss how much he will save and his weekly budget.
The goal is to have money remaining in his checking account until he receives his next paycheck. He has been doing quite well in this endeavor.
If he works hard this summer, he will have close to $2,500 saved by the end of September. We have a solid plan for him to join the Air Force once he graduates this year.
Everything seemed good until he told me his plans for October. He said he planned to spend $2,000 for his girlfriend’s birthday. WTF?
Renting Rooms to Family Members
Subliminal messaging. You can imagine my wife and I’s surprise at this announcement. Luckily, he has two parents who try to get to the bottom of things.
We asked,” What are you trying to achieve by spending this type of money? Do you want her to feel special, or do you feel sorry for her, etc?”
He didn’t have a coherent answer, which tells me something else is amiss. I assume he learned this erratic spending behavior by watching TikTok or kids at school.
We explained to him that he is not in a position to spend down his emergency fund on his girlfriend. That would mean he considers us his emergency fund—which will not fly.
More importantly, we said you can give much better gifts with far less money; you’ll just need to use your brain and heart.
How to Create, Buy, and Build Assets
The bigger issue. The bigger issue of this scenario is how my son believed spending every single penny of his savings for a birthday event was a good idea.
Where did he get this idea from? How does society convince young people to spend money they worked very hard to acquire?
The key to building wealth is budgeting. Yes, making more money and creating multiple income streams is ideal for accumulating assets.
Why You Need Passive Income
But everything in the wealth-building process starts and ends with a budget. It seems society doesn’t want us to learn these lessons; it’s better for the gross domestic product if we keep spending.
I counted every penny. I retired from the Marine Corps in 2023 with a $9,000 monthly pension. Luckily, my wife and I knew our budget inside and out.
We knew we could live a good life with $7,000/month, so we were able to retire early when I left the Marines. However, many people continue to work to fund their lifestyle.
I count every penny that comes into my household. I document every paycheck, rent payment, dividend, and royalty we receive.
Five Takeaways from “Scale”
But capturing everything that exits is more important than seeing everything that enters. Your budget should keep you on pace to save and invest for the rest of your life.
To keep things simple, let’s say I earn $5,000 a month from social security and a pension. My budget would be $3,500, and I would save and invest $1,500.
This is the most essential part. If I can’t save and invest $1,500 because my living expenses are too high, I must make adjustments!
Most people will not make adjustments to their lifestyle or way of life to allow them to save & invest. The key to building wealth is making adjustments to ensure your budget allows for saving and investing.
Why Rents Will Continue to Rise
Living below your means. Some people call these adjustments “living below your means.” I call it wealth building.
In 2019, I was 20 years into my Marine Corps career. My wife and I were broke and in debt. We weren’t big spenders, but our first home was way too expensive and cost us money every month.
That year, we decided to get roommates. We kept our roommates for over four years, allowing us to pay down all our debt (minus our mortgages).
That is the true reason we were able to retire at ages 42 and 39. We were debt-free and budgeting our way to financial independence.
We also choose to live in a low-cost-of-living area in Florida. I am originally from San Diego, California, where my $9,000 per month would be a pittance.
The True Value of Owning a Home
Building a better budget. Before making adjustments to your budget, you will need to create the correct mindset. You must have a goal or dream in mind before making money moves.
My dream is to bring my entire family to the white sand beaches of Pensacola. We would stay on a (rented) boat all day because we would not need to work. We would have all of our money coming in passively.
I achieved my dream, but there’s still more to accomplish. I want to ensure my kids and grandkids will have the opportunity to live life to its fullest.
I still budget relentlessly. It’s not about controlling your spending but prioritizing what is more important in your life.
Turn a Reverse Mortgage into an Income Investing Portfolio
People often say not to drink Starbucks every day; however, that’s not the best advice. If you love Starbucks, giving yourself a monthly Starbucks budget is a better way to enjoy your passion.
Suppose you give yourself $100 monthly for Starbucks (SBUX). Now, you must control how much you drink, and you will start following discounts, apps, and coupons.
You could also ask family and friends for Starbucks gift cards for holidays and Christmas. If you truly love Starbucks, you can still have it. You just need to set a limit so you can build wealth outside of your Starbucks addiction.
The True Costs on Owning a Home
I have a similar vice when buying video games. It took me a long time to control my urge to spend on the latest games. But, I ask myself if I will truly play the game.
If I want the game, I purchase it from my $750 personal allowance. If I can wait, I look for a price drop in the future. These little decisions are the key to building wealth.
Conclusion. I wrote a series of articles, “From Dirt to Dividends,” explaining how to invest $25 at a time.
- From Dirt to Dividends 1: Gardening & Preferred Shares
- From Dirt to Dividends 2: Livestock & Closed-End Funds
- From Dirt to Dividends 3: Insects & Business Development Companies
- From Dirt to Dividends 4: Community Farming & Mortgage REITs
- From Dirt to Dividends 5: Composting & Dividend ETFs
- From Dirt to Dividends 6: Vermiculture & High-Yield Blue-Chip Companies
If you started a garden and made $25 per month from selling tomatoes or cucumbers, you could invest that money in high-yielding investment products like preferred shares and closed-end funds.
Stock & Bond Investing in Your 50s
Those investments would pay you dividends that you could reinvest into more dividends. So, in essence, you keep the proceeds of selling tomatoes forever. That’s the power of compounding.
Budgeting aims to create enough headway in your budget for you to purchase income-producing assets like businesses, dividend stocks, and real estate.
If you have a discretionary income of $700 per month, create a budget for this money: $100 per month for Starbucks, $100 for Video games, and $200 for eating out.
You then invest the remaining $300 into high-yield savings accounts, Treasury Bonds, and dividend stocks. By starting there, you will build wealth beyond your imagination. That’s exactly how I started, and my wife and I now earn $2,000 per month in dividends. Good Luck!
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