How To Live Up Your Prime Earning Years Without Crippling Debt

 In Personal Finance

Earning

A wise man once said, “You Only Live Once” — so dance like no one’s watching and spend your earnings like there’s no tomorrow, right? Not quite. Although this sounds nice in theory, it’s not in your best interest.

In this blog post, we’ll explain how you can achieve the financial balance to enjoy yourself and be confidently cash-flow positive. Read on to find tips on how to live up your prime earning years without crippling debt.

The financial advice you’ve heard over the years is probably not as straightforward as it should be. The 3 tenets of a strong foundation in personal finance are:

  • Use money to achieve financial freedom.
  • Know what you’re spending money on.
  • Avoid debt.

High earners tend to associate spending freely with financial freedom – but what they actually desire is freedom from debt, freedom from constantly worrying about money, and the security to provide for their family’s needs and comforts.

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The key to achieving financial freedom is to make hard money choices today. But to make your budget realistic and sustainable, it’s crucial to have room in the budget for fun! Put aside some money each month for something you really enjoy — like a dinner with friends or a trip to the museum. If you don’t plan to spend on things you enjoy, you will get frustrated and give up, rather than making progress towards your financial goals.

It’s rewarding to indulge every now and again, but remember that money is essentially your “life energy.” You exchange your time and your energy for money, so spend it intentionally on what’s most important.

How can you do this? Spend money on things that truly mean something to you rather than buying into urges to purchase something just because you can. Do those 18 carat white-gold cufflinks really matter, or should you spend intentionally with your kids’ college tuitions in mind? Think about what matters to you in the long run, rank them within your household, and make discrete choices. That’s how your life energy should be spent, and you will feel empowered by putting your energy towards what matters most.

Let’s focus on knowing where your money is going. If you want to build wealth:

  1. Spend less than you earn.
  2. Track your spending.

In order to ensure you’re spending less than you earn, create a gap between your income and your expenses by living within your means. Take the time to reassess your spending continuously and ensure that saving for yourself is at the top of your priority list. For instance, if you like TV and want to keep premium  cable channels, you can call your cable company (and its competitors) to negotiate a better rate. Make a point to cut out unnecessary fees that don’t provide high value for your time and money. Whether it’s withdrawing money from an ATM or investing in retirement funds, look for low or no-cost alternatives. Seize any chance you have to spend less by being resourceful. It’s an incredibly empowering feeling.

Then, you can use that excess to pay down debt and SAVE! Remember: Having a high income does not mean you are wealthy. People who have a lot of wealth are those who adhere to this “gap” and, subsequently, can build an emergency fund, build net worth, pay off debt, and afford financial flexibility to lead richer lives.

Once you start tracking your spending, you’ll truly understand just how good or bad your situation actually is. You need to know where all of your money is going, and then decide on where you want it to go. So, map out your spending habits and track your progress in a concrete format. The Levanto Method will ensure your plans aligns with what actually happens. And remember, what actually happens changes over time.

Our last tip to create a financially comfortable life for yourself long term is: avoid consumer debt. Paying interest to buy something you can’t afford now, is often a curse that many households have difficulty freeing themselves from. If you have debt, be proactive and pay it off, no matter the amount per month. Making progress is better than no progress at all. Paying off high interest consumer debt like credit cards and personal loans is the best risk-adjusted financial return you can get on your money, bar none. Save money systematically and consistently and you’ll become wealthy over time. It’s a sure thing! “Slow and steady” really does win the race, and that’s how high-rollers get there. Take it from the data-backed book, “The Millionaire Next Door.”

The key takeaway here is that financial success is a mindset not a math equation. If you’re in your prime earning years, take advantage of it, and position yourself for success in the long haul. These best practices will help you assess your priorities and spend with purpose!

If you’re interested in taking a good, hard look at what you’re spending without doing all of the grunt work, free up your time by getting started with a household CFO from Levanto today. We’ll help you align your finances with your core values, priorities, and what’s most important to you.
saving for retirement

Submitted by Daniel A. Chen via Levanto Financial

Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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