For the past six weeks, I’ve been hard at work writing my “introduction to financial independence and early retirement” project for Audible and The Great Courses. It’s been challenging — and fun — to rework my past material for a new audience in a new format.
Naturally, I’m emphasizing two important points in this project: profit and purpose.
I believe strongly that you need a clear personal mission statement in order to find success with money (and life).
I also believe that the most important number on your path to financial freedom is your personal profit, the difference between your income and your spending. (Most people refer to this number as saving rate. I prefer the term “personal profit” because it’s, well, sexier.)
That last point is important.
Too many people want magic bullets. They want quick and easy ways to get out of debt and build wealth. They believe (or hope) that there’s some sort of secret they can uncover, that somehow they’ve missed. Well, there aren’t any secrets. Money mastery is a combination of psychology and math. And the math part is so simple a third-grader could understand it. Wealth is the accumulation of what you earn minus what you spend.
There are only two sides to this wealth equation — earning and spending — but a disproportionate amount of financial advice focuses on the one factor, on spending, and that’s too bad. Sure, frugality is an important part of personal finance. And if you’re in a tight spot and/or have a high income and still struggle, then cutting expenses is an excellent choice. But the reality is, you won’t get rich — slowly or otherwise — by pinching pennies alone.
The Biggest Lie in Personal Finance
Recently at his excellent blog, Of Dollars and Data, Nick Maggiulli wrote about the biggest lie in personal finance. What is that lie? He writes:
While there are lots of people who are in financial trouble because of their own actions, there are also lots of people with good financial habits who just don’t have sufficient income to improve their finances.
That’s why the biggest lie in personal finance is that you can be rich if you just cut your spending. And the financial media feeds this lie by telling you to stop spending $5 a day on coffee so that you can become a millionaire.
With charts and graphs and data, Maggiuli demonstrates that the problem facing people with low incomes isn’t their spending — it’s their earning. If you’re living at the poverty line — currently $26,200 per year for an American family of four — you’re not going to escape through thrift. Thrift is an emergency measure, a stopgap. It’s a bandage on a major wound.
Here’s the bottom line:
If you’re poor and hope to be not poor, your attention should be focused on increasing income, not on cutting costs. Your expenses are likely already very low.
If you have an average household income — currently $63,179 according to the U.S. Census Bureau — your path to building wealth will probably include both frugality and income enhancement.
If you have a high income but still struggle to make ends meet, your attention should absolutely turn to cutting costs. You need to rein in your lifestyle. But you won’t accomplish this with frugality; you’ll do this by optimizing the big stuff.
Maggiuli is fed up with the Biggest Lie. It “triggers” him.
“This is the same financial media who write stories about how people save money by living in a trailer, making their own dish soap, or reusing their dental floss,” he writes. “Yes, it’s that ridiculous. But what really gets me is how these examples are provided as ‘proof’ of how cutting spending can make you rich.”
From my experience, this sort of stuff is perennially popular because it’s easy. It’s easy to write and it’s easy to read, even if it doesn’t offer any real solutions. It’s more difficult to write about boosting your income. And, it’s more difficult to act on that information because it takes time, effort, and actual sacrifice.
Real-Life Examples of the Biggest Lie in Action
Just this morning, Trent at The Simple Dollar published an article about optimizing dishwashing for money and time. Trent writes:
If I can invest some time and thought and effort into optimizing a routine I do three times a week, and that optimization trims off five minutes of effort and $0.50 in cost, I’m literally saving 13 hours per year and $78 per year for the rest of my life.
Trent isn’t wrong. If his math is correct (and his discipline too), he will literally save 13 hours and $78 each year by optimizing how he does dishes. This isn’t a lie. In this case, the lie comes from what is implied: Do this and you’ll grow rich. You’ll reach financial freedom by becoming a smarter dishwasher.
Here’s the truth: You don’t reap the thirteen hours and $78 annual benefit as a one-time win. You’re saving five minutes and fifty cents per day. This may seem like a niggling point, but it’s important. If you gain thirteen hours or $78 at once, that’s something real and tangible, something you can work with. But an extra five minutes and fifty cents per day? Not so much.
I’m not saying that you shouldn’t optimize your dishwashing routine. Do it! But don’t expect it to make you rich. Because it won’t.
Here’s a bigger example of the lie in action.
Elizabeth Willard Thames writes at Frugalwoods, which is one of my favorite money blogs. Recently, especially, Liz has been publishing lots of amazing stuff. I look forward to each new article. (Those of you who make use of the Spare Change list of links on the GRS front page have probably noticed that I bookmark Frugalwoods frequently.)
As you might guess from the name of her blog, Liz focuses (almost?) exclusively on thrift. She and her husband practice extreme frugality. She wrote a book, Meet the Frugalwoods [my review], that documented their journey from poor college students to achieving financial independence on a 66-acre farm in central Vermont.
Now, there’s no doubt that Liz and Nate are thrifty. They practice what they preach. But their frugality is not the reason for their wealth, the reason they were able to retire early. You can’t buy a 66-acre farm in Vermont simply by optimizing your dishwashing routine. Or clipping coupons. Or hosting potlucks. To do this, you also need a high income. And that’s a part of the story that Liz doesn’t share with her readers. She and her husband made a lot of money, and that’s how they got rich — not through frugality.
I’m sure Liz doesn’t mean to obfuscate the truth, but that’s the net effect. She’s complicit in “the biggest lie in personal finance”.
To her credit, Liz seems to be incorporating more of the truth in her writing. Today, for instance, the About page at Frugalwoods acknowledges their high incomes. This didn’t used to be the case.
Now, I don’t mean to dog on Liz and Trent. They’re both good people and fine writers. But I think they do their readers a huge disservice by covering just one aspect of the wealth equation, by rarely (if ever) mentioning income. They’re active participants in Maggiuli’s “biggest lie”.
And I’ll confess: For a long time, I was guilty of the same thing. Sometimes, I still am. Hell, I’ve spilled a lot of words lately about my quest to optimize my food spending, haven’t I? I’m not claiming to be any better than Liz or Trent. But I want to at least acknowledge the lie — and the reciprocal truth.
The Biggest Truth in Personal Finance
If frugality isn’t the path to riches, what is? The answer is simple: Big Wins. Big Wins are the quickest way to wealth.
You can scrape your dishes and rinse them in cold water every day for the rest of your life, and you still wouldn’t match the benefits you’d obtain by purchasing a cheaper home. Or choosing a more fuel-efficient car. Or negotiating your salary.
The best way to spend less is to cut back on the big stuff.
If the average American family were to trim their housing costs by 10%, they’d save roughly $150 per housing payment — more than twenty times the benefit of optimizing your dishwashing routine. Transportation offers similar opportunities. According to the American Automobile Association, the average driver spends just over $9000 per year on her vehicle. Reduce this spending by less than one percent and you’ve accomplished the same thing as a year of diligent dishwashing.
But, as Maggiuli notes in his article, income is the elephant in the room, the subject that too many writers ignore.
You can only cut costs so far. There’s no way to reduce your spending below zero, and most of us can’t come close to that. As I mentioned earlier, the U.S. poverty line for a family of four is currently $26,200. (For two people, it’s $17,240.) Not counting his business, Mr. Money Mustache (a famously frugal fellow) spent $13,068 in 2019.
If you’re living like this and want to escape, you shouldn’t look for ways to cut costs. That stuff is useless to you. If somebody tells you otherwise, they’re lying. In these circumstances, you should be trying to increase your income. And even if you have a standard middle-class salary, boosting income is usually the best way to meet your goals.
There are three primary ways to earn more money.
First, become better educated. Despite the dire details in the gloomy mass media, one fact is undeniable: The more you learn, the more you earn. In the U.S., education has a greater impact on lifetime earnings than any other demographic factor. It’s more important than your race, your religion, your gender, your location. (In fact, the Census Bureau says education has five times the impact of gender on annual earnings.) That’s great news because while you can’t control your age or race, you have total control over your education.
Second, become a better employee. I read a lot on Reddit (and other places) where people piss on their employers, complaining about how their boss (or company) is out to screw them. This stuff is counter-productive. Sure, there are some shitty employers out there, but most are happy to promote and reward their best workers. If you want to earn more, work longer and harder than others will. If you’re in a situation where hard work goes unrewarded, switch jobs.
Finally — and most importantly — learn to negotiate your salary. Study after study shows the same thing: Failing to negotiate your salary can cost you over half a million dollars during the course of a typical career. Half a million dollars! For over a decade, I’ve been pushing Jack Chapman’s book, Negotiating Your Salary: How to Make $1000 a Minute. Let me do so again.
“You can’t frugalize income you don’t earn,” Liz writes in Meet the Frugalwoods. She speaks the truth! The biggest truth.
I’m no enemy of thrift. Yes, absolutely, pinch your pennies, if that makes you happy. Frugality is an excellent way to build good habits. Over the long run, many frugal habits combined can make a big difference to your financial situation.
But if you have a low income, do not focus on thrift. It’s a red herring. Instead, turn your attention to Big Wins. And, especially, to increasing your income. Because this is the biggest truth in personal finance: You can’t get rich through frugality alone.
As part of back to basics month, let’s use today to explore how you can get out of debt without gimmicks or games.
After twelve years of reading and writing about money, I’ve come to believe that debt reduction ought to be a side effect and not a goal. Getting out of debt is a target, not a habit. And, as we’ve been discussing recently, good goals are built around actions instead of numbers. If you restructure your life so that you’re spending less than you earn, you will get out of debt. It’s a natural side effect.
Having said that, I realize that a lot of GRS readers are struggling to get to square one. Getting out of debt is their goal and primary obsession. That’s okay.
Before you can begin repaying your debt, you must be earning a profit. Unless your income exceeds your expenses, your debt is actually increasing. If you’re continuing to add debt, or if you’re only able to make minimum payments, you must first find ways to spend less and earn more until you have a positive “saving rate”. (Both businesses and people earn profits. But when individuals earn a personal profit, we call it “savings”.)
After you’re earning a personal profit, you can (and should) make debt elimination a priority.
Why You Should Pay Off Your Debt
Debt repayment can improve your credit score, meaning you’ll pay less on everything from rent to car insurance to future borrowing needs. Plus, debt reduction is one of the best returns you can earn on your money.
Investing in the stock market provides an average annual return of about 10% — but that return isn’t guaranteed. Some years the market is up 30%, but other years it drops by 40%. When you pay down a credit card, you earn a guaranteed return of 20% (or whatever your interest rate is). That’s tough to beat.
There are also non-financial benefits to paying off debt, including:
Simplicity. The more debt you have, the more bills you have. It’s easier to manage your money when you have a simple, efficient financial infrastructure. Each time you pay off a debt, you move one step closer to this ideal.
Cash flow. Whenever you eliminate a debt, the money formerly used for that monthly payment becomes available to pursue other goals – including fun stuff like ski trips and knitting supplies.
Freedom. When you have monthly payments to meet, you’re chained to your job. You’re unable to take risks. Once your debt is gone, a wider range of options becomes available to you.
Peace of mind. Best of all, once you’re debt-free, you can sleep easier at night. You’ll put less pressure on yourself, and you’ll have fewer fights about money with your partner.
When I first tried to get out of debt, I lacked a system. Without a plan, I sent extra money to one credit card and then another. As a result, I never seemed to make any progress.
After deciding to become boss of my own life, however, I researched how to get out of debt. Many books recommended a strategy called the “debt snowball”. Although I was skeptical, I gave it a try. The method worked. Using it, I managed to eliminate my debt and begin saving for the future.
Stop Acquiring New Debt
This may seem self-evident, but the reason your debt is out of control is that you keep adding to it. Stop using credit. Don’t finance anything. Cut up your credit cards.
That last one can be tough. Don’t make excuses. I don’t care that other personal finance sites say that you shouldn’t cut them up. Destroy them. Stop rationalizing that you need them.
You don’t need credit cards for a safety net.
You don’t need credit cards for convenience.
You don’t need credit cards for cash-back bonuses.
You don’t need credit cards at all. If you’re in debt, credit cards are a trap. They only put you deeper in debt. Later, when your debts are gone and your finances are under control, maybe then you can get a credit card. (I don’t carry a personal credit card. I don’t miss having one.)
After you destroy your cards, halt any recurring payments. If you have a gym membership, cancel it. If you automatically renew your World of Warcraft account, cancel it. Cancel anything that automatically charges your credit card. Stop using credit.
Once you’ve done this, call each credit card company in turn. Do not cancel your credit cards (except for those with a zero balance). Instead, ask for a better deal. Find a low interest credit offer online and use it as a bargaining wedge. Your bank may not agree to match competing offers, but it probably will. It never hurts to ask.
Establish an Emergency Fund
For some, this is counter-intuitive. Why save for an emergency fund before paying off debt? Because if you don’t save first, you’re not going to be able to cope with unexpected expenses. Do not tell yourself that you can keep a credit card for emergencies. Destroy your credit cards; save cash for emergencies.
How much should you save? Ideally, you’d save $1,000 to start. (College students may be able to get by with $500.) This money is for emergencies only. It is not for beer. It is not for shoes. It is not for a Playstation 3. It is to be used when your car dies, or when you break your arm in a touch football game.
Keep this money liquid, but not immediately accessible. Don’t tie your emergency fund to a debit card. Don’t sabotage your efforts by making it easy to spend the money on non-essentials. Consider opening an online savings account. When an emergency arises, you can easily transfer the money to your regular checking account. It’ll be there when you need it, but you won’t be able to spend it spontaneously.
The Debt Snowball
With the debt snowball, you set aside a specific amount of cash each month to pay off the money you owe. At first, progress is slow. In time, however, you begin to make rapid progress, picking up speed like a snowball rolling downhill.
Step One
The first step is to make a list of your debts. For each obligation, include the balance you owe, the interest rate, and the minimum payment. Arrange the list so that the debt with the highest interest rate is on top. Next comes the debt with the second-highest interest rate, and so on, until you reach the final debt on the list, which will be the one with the lowest interest rate.
For instance, here’s the actual list of my debts from October 2004, ordered by interest rate:
Computer Loan: $1116 @ 15% ($48 min)
Business Loan $2800 @ 11% ($30 min)
Home Equity Loan $21000 @ 6% ($100 min)
Car Loan $2250 @ 5% ($170 min)
Personal Loan $1600 @ 3% ($100 min)
Personal Loan $6430 @ 0% ($60 min)
I had $35,196 in debt and my minimum payments totaled $508 per month.
Step Two
Once you’ve listed your debts, decide how much you can afford to pay toward them each month in total. This should be at least the total of your minimum payments ($508 in the example above), and preferably more. In my case, I started by allocating $700 every month toward debt reduction.
Step Three
Now, for all of your debts except the debt with the highest interest rate, make minimum payments every month. Use the rest of the money you’ve allocated for debt reduction to pay down the debt with the highest interest rate.
The computer loan topped my list of debts with an interest rate of 15%. The minimum payments for the other debts combined to $460 per month. Under this plan, I’d then take the remainder of the $700 I’d allocated toward monthly debt reduction and apply it to the computer loan. Instead of making the $48 minimum payment, I’d pay $240.
Step Four
Repeat this process every month until the debt at the top of the list has been eliminated.
Step Five
Here’s where this method gets powerful. With your first debt defeated, you don’t use your improved cash flow to buy new things. Instead, you use the extra cash to attack the next debt on your list.
If I start by applying $700 toward debt each month, for example, I continue to apply $700 toward debt each month until all of the debt is gone. After the computer loan is retired, I focus on the business loan. Because the minimum payment on my other debts would be $430, I could funnel $270 to pay off the business debt every month.
When the business debt is gone, I’d then throw $370 per month at the home equity loan, and so on. Ultimately, I’d be left with a single loan: the $6430 personal loan at 0% interest. Every month, I’d apply all $700 to get rid of this debt.
Pros and Cons
The debt snowball is powerful and effective. Mathematically, it’s the best way to get rid of your debt. There’s just one problem.
When you attack your debts from highest interest rate to lowest, you’ll pay less money in the long run. Unfortunately, many folks – including me – find the going difficult. In my case, I hit a wall when I reached the third debt on the list, my home equity loan. That $21,000 balance was going to take years to repay. I didn’t have that kind of patience.
Fortunately, I learned there were other ways to order your debts. You don’t have to tackle the high interest rates first.
Building a Better Snowball
Humans are complex psychological creatures. They’re not adding machines. Many of us know what we ought to do but find it difficult to actually make the best choices. (If we were adding machines, we wouldn’t accumulate consumer debt in the first place!) It’s misguided to tell somebody so deep in debt that they must follow the repayment plan that minimizes interest payments. The important thing to do is to set up a system of positive reinforcement.
Because of this, many people prefer slight variations on the debt snowball method. These methods ignore math in favor of psychology.
Dave Ramsey’s Debt Snowball
Financial guru Dave Ramsey has popularized one variation of the debt snowball. Instead of ordering your debts by interest rate, he suggests you attack those with the lowest balances first.
Using Ramsey’s method, my debts from 2004 would be ordered like this:
Computer Loan: $1116 @ 15% ($48 min)
Personal Loan $1600 @ 3% ($100 min)
Car Loan $2250 @ 5% ($170 min)
Business Loan $2800 @ 11% ($30 min)
Personal Loan $6430 @ 0% ($60 min)
Home Equity Loan $21000 @ 6% ($100 min)
As with the standard debt snowball method, I’d make minimum payments on each debt except the top one on the list. At it, I’d throw everything else I’ve allocated for debt reduction each month. When the top debt was eliminated, I’d move on to the one with the next smallest balance.
Ramsey’s variation isn’t as quick as paying high-interest debt first, and in the long-run, you’ll lose slightly more to interest payments. (In my own case, the projections showed it’d take an extra month to repay my debt and I’d pay and extra $841.15 in interest.) However, there’s a psychological advantage to doing things this way.
By attacking your smallest debts first, you get some quick wins, which provide a mental boost. This psychological lift provides extra motivation to keep attacking that debt. Every few months, you get the satisfaction of crossing another debt off the list! Ramsey says this is “behavior modification over math”, and he’s right. In fact, I opted to use this variation of the debt snowball when I repaid my own $35,000 of debt in 39 months.
Adam Baker’s Debt Tsunami
Other experts, including my buddy Adam Baker from Man vs. Debt, suggest yet a third alternative they call the debt tsunami. They argue it’s best to pay off your debts in order of their emotional impact. Attack your debts from smallest balance to highest, they say, but for added psychological boost, prioritize any debt that particularly bugs you.
“I used to be addicted to gambling,” Baker says, “and I had debt that was specifically associated with gambling. To pay that off first changed me as a person. To pay off the $600 I owed on a credit card was great, but it didn’t change me. It didn’t signify that my life was going to be different and that I was going to live in a different way.”
But paying off his gambling debt did mean something to him, so Baker attacked that first.
Here’s another example: Many people borrow money from their parents. These loans may carry interest rates of only two or three percent (or maybe they’re interest free), but they come with a lot of psychological baggage. This is another instance where it might make sense to pay down low-interest debt first because the non-financial rewards are so great.
The most important thing when paying off your debts is to pay off your debts; the order in which you do so is ultimately irrelevant. Find a system that works for you and develop the discipline to stick with it.
Note: It’s less imperative to repay low-interest debt. Businesses use “leverage” to borrow money cheaply so that they can earn higher returns elsewhere. You do the same when taking out a mortgage at low rate (like three percent) or using school loans to improve your education (which will, in theory, provide high future returns). It’s good to repay all of your debt, of course, but it’s okay to make repaying the mortgage a long-term goal instead of lumping it in with your debt snowball.
Supplementary Solutions
You can do other things to improve your money situation while you’re working on these three steps.
First, focus on the fundamental personal finance equation: to pay off debt, or to save money, or to accumulate wealth, you must spend less than you earn.
Curb your spending. Re-learn frugal habits. (Frugality is something with which most college students are all too familiar.) You can find some great ideas in the archives of this site. Also check Frugal for Life.
While you work to spend less, do what you can to increase your income. If possible, sell some of the stuff you bought when you got into debt. Get an extra job. (But don’t neglect your studies for the sake of earning more. Your studies are most important.)
Finally, go to your local public library and borrow Dave Ramsey’s The Total Money Makeover. Don’t be put off by the title — this is a fantastic guide to getting out of debt and developing good money habits. I rave about it often, but that’s because it has done so much to help my own personal finances. After you’ve finished, return it and borrow another book about money.
Simple, Not Easy
Human beings are complex creatures. Some of us are highly logical. Some of us are emotional. Most of us fall someplace in between. We rarely make decisions based on optimal paths; more often, we choose what makes us happy in the short term. I’m not saying that this is the right thing to do — it’s just what happens. For those who routinely make financial decisions based on emotion, it can be difficult to turn things around.
Complaining that personal finance is easy and “why doesn’t everyone do what they ought” is like saying that running a marathon is easy so why can’t everybody run one? Most of us understand how to prepare for a marathon — eat right and run a hell of a lot — but few of us have the dedication and mental fortitude to complete one. However, with a little discipline and some hard work, most people can complete a 10k race.
It’s the same with personal finance. It’s easy to say, “To build wealth, you must spend less than you earn”, but it’s another thing to do it, especially over the long term. In some ways, building wealth is more difficult than running a marathon. Training for and completing a marathon takes months. Dedicating yourself to a sensible financial plan is a lifetime process.
If personal finance were really as simple as understanding the math, we would all be rich. But it’s not. And we’re not. That’s why I think any small financial victory is important. That’s why I run this web site, and why I share whatever tips I can find.
I always say “do what works for you”“. Some people are able to succeed by paying high-interest debt first. But some people — myself included — have only been able to succeed by trying another approach. The approach may not be best from a mathematical viewpoint, but I believe that any method that actually helps you meet your goals is better than one that doesn’t.
Personal finance concepts might be simple, but that doesn’t mean they’re easy. I don’t mean to imply that they are. It took a lot of hard work (and a little luck) for me to get out of debt. It didn’t happen quickly, and it wasn’t easy.
The Bottom Line
As I mentioned at the start, I’ve come to believe that debt repayment is a side effect and not a goal. You shouldn’t make it your primary purpose.
If you do the other things I recommend, such as creating a personal mission statement and boosting your profit margin, you’ll naturally pay off debt as a matter of course. But you’ll enjoy a benefit many people don’t have once their debts are gone.
You see, a lot of people feel lost once they’ve dug out of debt. Search online and you’ll find tons of questions and conversations about what to do next. Debt repayment had given them purpose, and now that purpose is gone. As a result, they lose financial direction. And like a dieter who had aimed for a weight instead of a lifestyle change, an unfortunate few of the newly debt-free find themselves resuming bad habits.
If you’re pursuing other goals and intentionally building good habits, you’ll get out of debt. And once you get out of debt, the good times will continue: That debt snowball you’ve been building will transform itself into a wealth snowball.
Congratulations! You’re on your way to financial freedom!
Have you ever had to dig out of debt? What methods did you use? Were some more successful than others? If you had to do it over again, would you have done anything differently? What advice would you give to others who have just taken on the role of money boss in their lives?
By Melissa2 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited November 30, 2016.
No matter your political affiliation, you were probably irritated by this election season.
Most of America waited on bated breath to see who would become the next commander in chief. Democrats feared the worst if Trump became president, and Republicans feared a Clinton victory.
Now that we know Trump will become the next president, many people are contented, while others are either quietly grumbling, protesting, or pondering a move to Canada.
What’s done is done. Trump is elected, and it’s now time for all of us to take a step back and look at the fear that dominated this political election cycle. Each party worried about the repercussions, including financially, if the other candidate took office.
While politics can be frightening, I think part of our fear stems from how unprepared we as Americans now are to be self-sufficient. We spend all of our income and then some. We have no reserve to fall back on. That alone leads to fear.
Learning From Previous Generations
Generations of Americans have been much more self-sufficient than we are because they had to. There was no store to stop by to buy ingredients to make tonight’s dinner. There weren’t fresh vegetable shipped in from all around the world. People had to make their own meals and produce their own food. Money was not plentiful, so resourcefulness was required.
We can learn a great deal by learning from early generations.
Avoid Debt
Clara, who was the star of Cooking with Clara, said that she and her family were able to survive the Great Depression much better than their neighbors because her family owned their house outright and did not have debt.
By being resourceful and growing a very large garden, they were able to have enough food to eat. Because they owned their home and didn’t have debt, they could survive on very little. How many of us can say that today?
Have Ample Food Storage
Look in your refrigerator and freezer right now. If something happened and you were unable to buy groceries for two weeks, either because of a catastrophe or because you suddenly didn’t have the money, would you be able to survive? Previous generations routinely put up food to last them through the long winter months, but we no longer do that. Instead, we depend on going to the store every few days and buying what we need.
All it takes is one snowstorm for the shelves to clear. If you’re not prepared, you’ll have a much more difficult time. Our family likes to stock up during sales and fill the freezers and pantry. If worse came to worse, we have at least a week of food. After that, we’d still have food, but it wouldn’t be as well rounded as I’d like.
Savings
For much of the last half of the twentieth century, Americans saved their money. Now? Not so much.
“From the end of the Second World War until the early 1980s, the personal saving rate—personal saving expressed as a percentage of disposable income—gradually trended up. . .The picture was that of a fairly steady rise in the personal saving rate, from about 7-1/2 percent in the early 1950s to around 10-1/2 percent in the early 1980s. Since that time, however, the household saving rate has declined precipitously, and in the last couple of years, it has averaged only about 1-1/2 percent” (Federal Reserve).
If we want to feel more secure and better able to handle any political turbulence, we must look to our ancestors and begin to practice self-sufficiency again.
The idea that we can live on the edge financially without repercussions is a dangerous one. In many ways, it’s up to us to create our own financial security, regardless of which party assumes office.
How financially self-sufficient are you? What steps do you take to become self-sufficient?
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Affirmations have been all the rage over the past few years, and people are using them to achieve their goals.
“I am in control of my finances”
“Money comes easily into my life”
or even “I love money!”
What about you? Do affirmations work for your goal? I’m not one to shy away from a challenge, so let’s find out!
Are you struggling to make more money, even though you work a lot? Do you feel like your finances aren’t where they should be and that there is something missing in your life?
If so, here are some money affirmations that can help.
Affirmations are statements that you say to yourself over and over again.
They can help you manifest your goals by re-affirming them in your mind on a daily basis. They become part of who you believe yourself to be and bring about desired outcomes with ease.
You may have heard these before, but do you consistently say them to yourself? Journal them? Write them everywhere?
I’ve compiled some of my favorite money affirmations for money below. I hope these help give you the encouragement and inspiration to re-affirm what’s important in your life!
What are money affirmations?
Affirmations are a powerful way to change your thoughts and, in turn, your life.
They are simple, positive statements that you repeat to yourself regularly. The purpose of affirmations is to attract whatever you desire into your life- including money!
Why are money affirmations important?
It’s important to remember that affirmations work subconsciously.
You may not see results overnight, but with time and repetition, the desired outcome will manifest. Wealth affirmations specifically focus on money and what a person will do with it after they have made it through the manifestation process.
Affirmations on Money
Although using affirmations is a great way to achieve financial success, they should not be used as the only tool in your arsenal. Manifesting your goals takes time and effort, and affirmation is just one piece of the puzzle. Make sure to take actionable steps towards your goal and be patient!
Affirmations can also be used to create SMART financial goals– specific, measurable, attainable, relevant, and time-bound goals that you can track over time for motivation purposes
How can money affirmations help you attract more money into your life?
Affirmations are one way to help you focus on your thoughts and dreams.
When you repeat an affirmation, you plant a seed in your subconscious mind that will grow over time.
This helps to manifest what you want into reality.
These seeds will grow over time and bring about new thoughts, beliefs, and habits into a mindset of abundance. Money affirmations have a “magnetic” effect that attracts like-minded thoughts to your life–helping you achieve your financial goals faster!
There are many ways to bring more money into your life, but using affirmations is one of the most effective methods. Affirmations can help create strong positive emotions that attract money and other forms of abundance into your life. When used consistently, money affirmations can be a powerful tool for attracting wealth and prosperity into your world!
Below we will give you exactly what can I say to attract money.
What is a way specific money affirmations can be used to attract more money?
When it comes to attracting more money into your life, there are many different affirmations that can be useful.
Many people ask, “What are the best affirmations for money?”
Below are a few examples to get you started:
“I am abundant and prosperous.”
“Money flows easily and effortlessly to me.”
“I am safe and secure with my finances.”
“My income is constantly increasing.”
“I have all the money I need and more.”
Do affirmations work for money? Absolutely, yes.
How often should you repeat money affirmations in order to see results?
The more often you repeat your affirmations, the better.
However, don’t feel like you have to do it all day long. Just a few minutes each morning and evening should be enough to start seeing some results.
Remember that affirmations are just like any other habit- the more you do them, the easier they become and the better the results will be. So stick with it!
Do money affirmations really work or are they just a waste of time?
There is a lot of debate on the internet about whether or not money affirmations actually work. Some people swear by them and claim that they have had great success using them, while others say that they are nothing more than a waste of time.
One thing that is for sure is that money affirmations do have some very powerful success stories behind them.
People like Oprah Winfrey and Lady Gaga were successful before they ever became public figures, and a lot of their success can be attributed to their belief in themselves and their determination to work hard at everything they do.
In fact, many of the billionaire morning routines include starting their days with positive affirmations.
Can affirmations make you rich and come to abundance?
When it comes to getting rich, many people believe that affirmations are the answer.
The idea behind using affirmations is that if you repeat something often enough, you will start to believe it and eventually it will come true. However, this isn’t magic – rather, it’s a matter of shifting your beliefs.
And while affirmations won’t make you rich overnight, they can cause desired results to appear over time.
Mindset and Affirmations
The key thing to remember with affirmations is to maintain a positive mindset.
You want to be focused on attracting wealth and abundance into your life, not just thinking about what you don’t want. Money affirmations can help raise your vibration and shift your beliefs so that you can start attracting more money into your life.
Remember…Mindset is everything.
How do affirmations work?
Affirmations work because we keep repeating them to ourselves. It’s like a self-fulfilling prophecy!
Our subconscious mind picks up on the positive affirmation and starts to change our behavior over time.
The more effort we put into it, the better chance that our subconscious will start accepting these new thoughts as truth.
Affirmations are conscious and subconscious–both play a role in helping us manifest what we desire. Positive affirmations help us get rid of negative thoughts and replace them with more confident ones. We need to be mindful of our words and truly believe in order for the affirmation to work its magic!
The subconscious begins to accept positive reinforcement over time as long as we continue putting in the work. Eventually, this helps us change our mindset and see things in a different light. “I can” replaces “I can’t.”
This is because affirmations work best when they’re phrased positively!
What do experts say about using money affirmations to attract more money?
When it comes to attracting more money into your life, there are many things you can do to help increase your chances of success. Some people may swear by the power of affirmations, while others find that other methods work better for them.
However, most experts agree that using some type of affirmation is a good way to start visualizing your goals and keeping them at the forefront of your mind.
Affirmations can also help open up your mind to opportunities in a confident way, attracting more opportunities for you. While they won’t create wealth on their own, if used correctly they have the potential to help people create more money.
Keep in mind that affirmation is not a magic solution – it takes hard work and dedication no matter what method you choose – but if you’re looking for an edge, using daily affirmations could be the right choice for you.
What is the science behind money affirmations and how do they work?
When it comes to the science behind money affirmations, there is a lot of research that supports their efficacy.
A study published in The Journal of Positive Psychology found that people who regularly use positive self-statements (such as daily affirmations) have increased well-being and decreased levels of anxiety and depression.
The reason why affirmations work is because they help to change your beliefs and the vibrations you emit into the universe.
When you think positively about yourself, you are sending out positive vibes into the world which can attract more good things into your life.
Your words are powerful magic wands when it comes to shaping your own reality. What you focus on expands! So by repeating money affirmations, you are essentially telling the universe that you want more money in your life and that you are ready for it to come to you.
Affirmations are an easy way to change the way that you think, and they can be used as a tool to remove any barriers that are holding you back financially in life. If you’re feeling stuck under a scarcity mindset, start using some money affirmations today and see how they can help you achieve your goals!
Here are 125+ money affirmations you can start using today!
Money Manifestation Affirmations
When you repeat money affirmations, you are programming your mind to believe that it is easy and natural for you to be prosperous and successful.
You are sending a message to the universe saying, “I am open to receiving wealth and abundance.” As you continue to recite these affirmations, you will start to see changes in your life as you attract more money into your experience.
Manifesting a healthy relationship with money is important.
1. “I have more than enough money, and that’s okay.”
2. “It is easy and natural for me to be successful and prosperous.”
3. “My income is constantly increasing.”
4. “I easily attract new sources of income into my life.”
5. “I gratefully accept all the wealth and abundance the universe has to offer me”.
6. “When I put in the work, the universe will provide.”
7. “I anticipate money to work for me.”
8. “Money + abundance happen to me.”
9. “With the power of attraction, I will bring wealth and money into my life.”
10. “I love having plenty of money.”
11. “The more I give away, the more I receive.”
12. “Wealth can come to anyone including me.”
13. “I am enough and my intention attracts money to me.”
14. “My prosperity is unlimited.”
15. “My path leads to riches.”
Money Affirmations that Work Fast
Money affirmations are a great way to attract more money into your life.
They are positive statements that help you focus on your goals and visualize yourself achieving them. Repeating these affirmations will help you program your mind for success and abundance.
16. “Money is a positive force in my life.”
17. “I will make $100 today.”
18. “I will make $1000 tomorrow.”
19. “By design, I will reach my potential.”
20. “I am a magnet for wealth and abundance.”
21. “I believe in myself.”
22. “Money flows easily and abundantly to me.”
23. “Money is my friend, not my enemy.”
24. “By releasing my money blocks, I open myself to letting money flow in.”
25. “I welcome various ways to make money.”
26. “Money allows us to live the life we want and achieve our goals easily.”
27. “I am in control of my future.”
28. “I attract money easily in my life.”
Powerful Money Affirmations
Money affirmations are a powerful way to attract more money into your life.
Repeating these affirmations will help you to change your mindset and start to see yourself as someone who has abundance, rather than someone who is always short on money.
These power money affirmations reassure you that no obstacle is too big and that you have the power to overcome any hurdle.
29. “I am blessed with an ever-flowing stream of prosperity.”
30. “I release all fear and doubt around money.”
31. “More money is coming to me.”
32. “I am confident in my ability to handle any money-related challenges that come my way.”
33. “As a powerful creator, attracting money into my life with the power of my thoughts and feelings.”
34. “I will invest $100 make $1000 a day.”
35. “I know that I can overcome any obstacle and attract more money into my life.”
36. “My guiding belief is my motivation and my reality.”
37. “I am a money magnet; money comes to me easily and effortlessly.”
38. “I am capable of overcoming any money-obstacles that stand in my way.”
39. “Money is a close ally in life.”
40. “Being independently wealthy is a part of my life.”
41. “I am grateful for what I been blessed with.”
42. “I am rewriting my money story.”
43. “Money helps me experience time freedom.”
Positive Money Affirmation
These affirmations underscore the importance of taking a holistic approach to financial health. Self-care is essential, as is developing a strong sense of self-worth.
When you feel good about yourself on all levels, you’re more likely to make healthy financial decisions.
44. “I am worthy.”
45. “I release my limiting beliefs surrounding money.”
46. “Building self-worth will lead to better financial choices.”
47. “I visualize my future self and believe it has already happened.”
48. “Money is just a form of energy that flows to me effortlessly and abundantly.”
49. “I am able to easily afford whatever I want.”
50. “Money is an avenue to have a positive impact.”
51. “I am so lucky that I am able to earn more money than I could possibly fathom.”
52. “Money is attracted to me by virtue of the powerful vibrations I radiate.”
53. “I am not ashamed or feel guilty about having an abundance of wealth.”
54. “Money comes to me in huge quantities through my ability to attract it from the universe.”
55. “It is safe for us to be wealthy and successful.”
56. “I am thankful for the positive impact money has had on my life.”
57. “I love my positive outlook on my life and the riches that come from it.”
Financial Affirmations
While you may be feeling down about your current money situation, know that there are ways to change it. Use a variety of positive financial affirmations for different money goals, such as attracting more money into your life or becoming debt-free. You can also personalize the affirmations to fit your own needs and situation.
These financial abundance affirmations help guide you to where you want to be financially. Learning how to become financially independent starts with believing that you can.
You may not be where you want to be yet, but with time and effort, your wealth situation will improve.
58. “I will have money left over at the end of the month.”
59. “My payday is approaching.”
60. “Money does not control me. I control my money.”
61. “Money comes to me in unexpected and wonderful ways.”
62. “My finances are always in perfect order.”
63. “My income will exceed 6 figures.”
64. “I have complete control over my financial destiny.”
65. “All my needs and wants are always taken care of.”
66. “I love having lots of money to spend.”
67. “Don’t let feeling behind today stop you from building the life you want tomorrow.” — The Financial Diet
68. “I am financially free.”
69. “I am worthy of financial success.”
70. “With hard work, I will attain the financial future I desire.”
71. “I am excited to maintain my budget and reach my money goals.”
72. “Step by step, I will achieve my financial goals.”
73. “Money is a tool available to anyone and I will use it to my advantage.”
Saving Money Affirmations
While your current money situation may be less than ideal, you can use these affirmations to change your mindset and start attracting more money into your life.
Repeating these affirmations will help you focus on the positive aspects of wealth and abundance, and eventually bring more financial security into your life.
74. “Money in the bank makes me feel secure.”
75. “My money situation may not be what I want right now, but I am in better shape than I was last month.”
76. “I will save 10000 in a year.”
77. “I might make a pretty low-income at the moment, but I am still saving money.”
78. “My worth is not determined by my net worth.”
79. “I am saving for my future self.”
80. “Making small sacrifices now will build my increase my savings later.”
81. “Through investing I am able to make passive income.”
82. “A penny saved is a penny earned.”
83. “Financial stability brings me peace.”
84. “I say no today in order to say yes tomorrow.”
85. “I will stay debt-free because money is constantly flowing into my life.”
86. “My saving rate is beyond my dreams.”
87. “The challenge of saving more money lures me in.”
Money Flows to Me Easily and Effortlessly
One of the simplest and most effective ways to attract more money into our lives is through the use of affirmations.
Repeating positive statements about money can help change our underlying beliefs and open up new opportunities for financial growth.
Money comes in both expected and unexpected ways, so it’s important to stay open-minded about how it could enter your life.
88. “I let go of any resistance to attracting money.”
89. “Financing my life is an easy task for me.”
90. “I will double 10k quickly.”
91. “My money situation right now may be tight but it’s changing for the better”
92. “I am surrounded by an aura of wealth and abundance.”
93. “Money comes in many different forms, and it can come to us in both expected and unexpected ways.”
94. “Money is an energy that flows to us in many ways.”
95. “I attract money easily and effortlessly.”
96. “I am open to the flow of money my way.”
97. “Money magnet is my name.”
98. “Money attraction is easy for me.”
99. “I can rely on left hand itching to bring me money.”
100. “I turn money into more money.”
Money Affirmations for Success
These help you cultivate positive beliefs about your ability to earn and manage money. These positive thoughts will help support your efforts as you work towards financial success.
101. “It’s easy and natural for me to be prosperous and successful.”
102. “I am surrounded by people who support my financial growth.”
103. “Money is a tool that lets me construct my life how I see fit.”
104. “I have unlimited opportunities to make more money.”
105. “I am not afraid of achieving success.”
106. “Becoming rich doing what I love is a gift.”
107. “I have super-abilities to be successful.”
108. “Success is the best revenge.”
109. “I don’t need to be a millionaire to be successful.”
110. “I have control of my financial future.”
111. “The sky is the limit to what I can achieve.”
112. “A positive money mindset will serve me well.”
Wealth Affirmations
There are many different money affirmations that can be used to attract more money into your life.
Wealth and abundance come in all shapes and sizes, so it’s important to find an affirmation that resonates with you. “I am worthy” is a good place to start if you want to build self-worth and confidence, which can lead to better financial choices down the road.
You may not be where you want to be yet, but with time and effort, your wealth situation will improve.
These are positive affirmations for success and wealth.
113. “I am open and receptive to wealth and abundance.”
114. “Wealth and prosperity are my birthrights.”
115. “I am open to receiving all wealth life brings me, not just what is coming today or this month.”
116. “Abundance can come in many different forms!”
117. “Wealth is a step towards how to FI.”
118. “I have more than enough money, and that’s okay.”
119. “Financial freedom will happen sooner than I believe.”
120. “The more wealth I have, the more I give back to others.”
121. “There is plenty of wealth to be made.”
122. “Money can be shared when saying ‘I appreciate you.’”
123. “Wealth flows to me easily.”
124. “Having more than enough money does not mean I love money.”
125. “My wealth is limitless.”
How Do You Write Affirmations For Money?
Regardless of how money comes to us, it is important to remember that we always have the ability to attract more of it into our lives. By repeating positive affirmations about money, we can increase our chances of attracting more abundance into our lives.
Following these guidelines will help you write effective affirmations that move negativity out of your life and bring more money into it!
When you’re writing affirmations for money, it’s important to remember a few key things.
Step #1 – Need a Present Tense
First, always use the present tense; this will help your unconscious mind process the affirmation more easily.
Step #2 – Change to Positive Words
Second, make sure your words are positive–for example, “I only spend money on things I love” rather than “I don’t have to worry about money.” This will help you attract financial abundance and success into your life.
Step #3 – Believe it is Already Yours
Finally, before affirming any goal or intention, take a moment to really feel what it would be like to have that already in your life. Our unconscious minds respond better when we can imagine and experience what we want in advance.
There are a number of books that focus on mindset and how to change it for success. The list below contains some of the best ones that I’ve found.
These books teach you to believe in your ability to shape your own destiny and achieve great things.
Remember you need these essential mindset books to help you change your perspective and achieve success. Remember, it’s not about avoiding or getting rid of obstacles, but turning them into advantages.
Embrace the challenges in life and continue moving forward!
Mindset is everything.
This is a simple but profound statement that has been discovered by Carol S. Dweck, Ph.D. She found that success in school, work, sports and almost every other area of human endeavor can be dramatically influenced by how we think about our talents and abilities.
The key to success is having the right mindset – a growth mindset.
In order to achieve success, you need to change your mindset.
This book will teach you how to change your mindset and get the most out of life and some colorful quotes that you will quote.
You will learn how to change what you don’t love, use external forces to kick some serious change in you and find your inner power. You will learn how to embrace your inner vibes.
Each morning start your day with a positive affirmation from this Daily Rituals book. Follow the simple exercises.
By practicing these rituals regularly, you will train your mind and raise your vibration levels.
Color your way to manifest your money affirmations. Unplug yourself and get a well-needed mental break.
Attract the abundance of wealth into your daily life.
Make Money Affirmations Quotes
The best part of all of these powerful money affirmations … you can turn them into quotes!
You can use a simple post-it note and pen! Or upgrade and make them in Canva.
Not artistic? Etsy has you covered! Don’t worry Etsy has plenty of money affirmation quotes.
In fact, we are thinking about designing a package of money affirmations quotes for our readers!
Hang them on your wall as a constant reminder.
How can you tell if money affirmations are working for you?
One way to tell if money affirmations are working for you is to look at your bank account.
If you find that you have more money in your bank account than usual, it is a good sign that the affirmations are working.
Another way to tell if the affirmations are working is by looking at your overall mood and attitude towards money.
If you find yourself thinking about money less often and feeling happier and more positive, then the affirmations are definitely working for you!
Money affirmations take time to manifest, so don’t become discouraged if you don’t see immediate results.
Repeating abundance affirmations can help you to open up to the flow of wealth in your life.
By affirming that you are open to receiving all the wealth life has to offer, not just what is coming your way today or this month, but also the wealth of tomorrow, you start to invite more money into your life.
Check out these millionaire quotes to keep you aiming for the stars!
At the end of the day, you don’t need to feel guilty or ashamed about having an abundance of wealth–that’s perfectly okay!
Know someone else that needs this, too? Then, please share!!
Today our mutual friend J.D. Roth has stopped by to tell a story. I am happy to share this one with you because in real life he is the real deal and a very nice guy. If you weren’t already aware of his fame, this is the guy who who founded the blog Get Rich Slowly […]
A key gauge of U.S. inflation rose last month by less than expected and consumer spending stabilized, suggesting the Federal Reserve may be close to ending its most aggressive cycle of interest-rate hikes in decades. Excluding food and energy, the Fed’s preferred inflation gauge — the personal consumption expenditures price index — rose 0.3% in … [Read more…]
How much money should you save, as a percentage of income? The 50/30/20 rule says to save 20 percent of your income. But it’s not always so simple.Learn how much of your paycheck you should save and get budgeting basics for Gen Z. Discover strategies to make the most of your savings plan and start building financial security today!
The post How Much Should I Save Each Month? appeared first on Money Under 30.
Yesterday, my pal Jim Collins dropped me a line. “The audio version of my book just came out,” he told me. “Audible is letting me give away some free copies. Do you think your readers would be interested?” I do think so! Plus, this is a perfect opportunity to migrate my review of The Simple Path to Wealth from Money Boss to Get Rich Slowly. At the end of this article, I’ll explain how you can get a copy of Jim’s audiobook, if you’re interested (and lucky).
In 2015 and 2016, Kim and I took a 15-month RV trip across the United States in an RV. It was awesome.
During late July 2015, we stopped for a few days on the Wisconsin side of Lake Michigan. My friend Jim Collins had invited us to spend some time at Shamba, the waterfront vacation home that belongs to his sister-in-law. For several days, we sipped wine and walked in the surf with Collins and his wife. We also talked about work. (I had just begun formulating plans for Money Boss; Jim was writing a book.)
“What do you do?” Kim asked Collins on our first afternoon at Shamba.
“I retired early,” he explained. “I saved up and got out of the rat race. Now I write a blog about money. It started as notes I wanted to share with my daughter, but it’s become something bigger. I guess most people know me because of my series of articles on stock-market investing. Now I’m turning the blog into a book.”
“Ugh,” Kim said. “Investing frustrates me. J.D. has tried to explain his investment philosophy a couple of times since we started dating. He says it’s simple, but it still seems overwhelming.”
“It doesn’t have to be,” Collins said. “You should read my articles. Maybe they’ll help.” Kim read his articles. They helped.
By the time we’d driven around the Upper Peninsula of Michigan and made our way to Indiana’s Amish country, Collins’ blog had spurred Kim to action. As I sat in the RV outlining my early vision for Money Boss, Kim was opening Vanguard accounts and moving her retirement savings into index funds.
During four years together, I couldn’t persuade Kim to manage her own retirement savings. Collins convinced her in two weeks. His advice is that good.
Since that weekend in Wisconsin, Collins published the book he was working on. The Simple Path to Wealth presents the advice from his blog in a coherent, unified package. It’s an easy-to-understand primer on stock-market investing â and financial independence.