She Strengthens

Rapid Wealth Building: The Power of Living Below Your Means

When it comes to building wealth quickly, one of the most crucial decisions you can make is to live below your means. But what does that really entail? While saving money on groceries and dining out is important, it’s only the tip of the iceberg. The real game-changer lies in your choice of living arrangements.

Setting Financial Goals

Before we dive into the numbers, it’s essential to have a clear understanding of what you want to achieve. Doubling your savings rate isn’t just a happy accident; it’s a deliberate decision that requires careful planning. As Lewis Carroll so aptly put it, “If you don’t know where you’re going, any road will take you there.” Determining your financial goals is the first step towards achieving them.

The Cost of Housing

When it comes to housing, the general rule of thumb is to spend no more than 30% of your income on rent. However, this benchmark can be misleading. In reality, many families, regardless of income level, struggle with housing costs that exceed this threshold. In Cook County, a staggering 52% of renter households are rent-burdened, surpassing the national average.

Breaking Free from the Norm

When my girlfriend and I were searching for a new place to rent, we didn’t follow the crowd. We opted for a location that allowed us to walk to work, a comfortable living space with amenities like an in-unit washer/dryer and balcony, and most importantly, a price tag that didn’t break the bank. By choosing to spend less than 15% of our income on housing, we’ve been able to allocate more funds towards our savings goals.

The Benefits of Living Below Your Means

Our decision to live below our means has had a profound impact on our finances. Instead of paying for a luxurious lifestyle, we’ve been able to fully fund our retirement accounts, including our 401k and IRAs. This choice has given us a sense of security and freedom, knowing that we’re making progress towards achieving our financial independence.

Crunching the Numbers

To put things into perspective, if we had opted for a more expensive rental, we would have needed an additional $30,000 in income to cover the costs. After taxes, that would have left us with only $21,000 to spend on rent. Instead, we’ve been able to redirect that money towards our savings goals, resulting in a significant boost to our net worth.

Pursuing Financial Freedom

Living below your means requires discipline and a willingness to go against the grain. But the rewards are well worth it. By making conscious choices about how we spend our money, we’ve been able to accelerate our journey towards financial freedom. It’s a decision that has given us peace of mind and a sense of security, knowing that we’re building a brighter financial future for ourselves.