There are two roads to our financial goal. We practice both, and we strongly encourage you to practice both as well.
Think of these as the Low Road and the High Road.
The Low Road
The Low Road is fixed in its benefit. There’s only so much you can get out of it. But wait! That makes the low road no less important. It is ‘low’ not because it is inferior, but because it is your foundation. You should take this road first, squeeze it for every dime that it’s worth. That way, you’ll know exactly where the High Road must take you.
The Low Road is the reduction in your expenses. It’s built on money management skills, careful planning, and good old fashioned discipline.
We’re not asking you to live the life of a hermit, locked away from anything that makes life worth living — we sure haven’t. If anything, we’ve lived more and found more meaning in five years on the low road than the last twenty-five years off it.
It’s not so much about spending less as it is about spending smarter.
So what does this have to do with that million dollars we promised you?
Everything.
According to a study covered by CNBC, (here) the average American consumer spends around $5,400 dollars per year on impulse purchases. That comes out to $450 per month.
So, if we plug that into our investment calculator from before, assuming a starting value of $0 and we funnel the $450 dollars we are now saving per month, you end up with just under $1 million dollars over the course of the average career (35 years).
That’s not counting your retirement plan, outside investment, employer contributions, or any of the other means by which you will build wealth in your lifetime.
And all it took was a little planning and a bit of discipline. (Don’t worry, we’ll get to the details of that planning and discipline soon.)
Either way, there’s your first million. It’s already in the hands of your future self.
Ok, hold on. If we had read this before we started down the road, we would have rolled our eyes and called BS. So the average American spends $450 per month on junk, we would have said. We don’t. We can’t afford to. We would have been indignant, incensed.
Only we were spending that much. Even back when we, as a household, were earning $30k, we were. We just didn’t know it. We couldn’t see it. I told you that running Personal Capital was the most eye-opening experience of my financial life… This is why. Until we started tracking our spending, we had no idea.
You might not be able to save $450 dollars through discipline alone, we get that, but you can probably save something. And every little bit helps. It’s one step closer to your $600 goal.
And for the rest, well that’s what this blog is really about….
The High Road
And then there’s the High Road. This is the sky’s-the-limit road. There is no upper ceiling here. You will meet obstacles and setbacks, but the one and only thing that will stop you is your own lack of hustle.
This is where we put our skills to work, and get paid for it. Our goal is $600 per month minimum, but why stop there? If you can bring in more, why not? More importantly, if you love what you’re doing, why give it up?
The goal of the High Road is to fill your hours with as much fulfillment as possible. For some of you, that will be done through work. For others it will be done through free time or travel or freedom or charity. The High Road is about tailoring your working life to match your desires. For us, that means high-earning, highly efficient work that takes as little of our time as possible.
This blog is really about the High Road, about showing you how we built two businesses in our free time, about (more importantly) how we manage those businesses to ensure we reach our $1 million goal without sacrificing our quality of life.
The Beauty of Both Roads
Sure, you can follow just one road or the other. Both are great, and both will put more money in your wallet. But something interesting happens when you combine the two.
It’s a real the-whole-is-greater-than-the-sum-of-the-parts kinda thing.
Look at it this way: Right now, if I hand you $600 dollars, what percentage of your monthly cost-of-living will that cover?
If you’re the average American, your cost of living is just under $4800 per month .
And that’s assuming you don’t use tobacco or vape.
So…$600/$4800 x 100= 12.5%
If I handed you $600 right now, it would cover 12.5% of your budget.
BUT
Leslie and I are not average Americans. We have have taken the Low Road. We have managed to get our cost of living down to about $2000 per month. We’ve cut more than 50% of our expenses with no sacrifice to our level of life’s enjoyment. (Honestly, we enjoy life much more now. More on that later.)
So what would $600 mean to me?
$600/$2000 x 100= 30%
The same amount of money covers nearly three times as much of my expenses than the average American.
The High Road is exciting, but the Low Road lets you get more out of each dollar you earn. The High Road has the more thrilling view, but the Low Road takes you on the more satisfying journeys. And at the end of my journey, when I have squeezed every last iota of effort out of my octogenarian body, the Low Road will still be there for me, helping me, my children, and my children’s children long after the High Road had moved beyond my reach. The High Road, however, will have built a multi-generational fortune to keep my descendants secure.
Whichever path you choose, you must first learn to Manage Your Money Like a Business
