A Budgeting Trick That Will Give You Financial Independence


Financial independence is the American dream. Sure, we all want to own a home and have a white picket fence and 2.4 kids (I mean, I don’t know about that – I’d shoot for a whole number myself, but math is not my strong suit so you go ahead and do what you like in this situation) and a dog (tried the dog thing; it ate the cat so again, do what you feel is right). It’s a nice dream, but without financial independence it’s not a dream many people will ever realize.

Here’s the deal with financial independence; it’s not something you begin working toward as a gainfully employed adult. It’s something you begin working for the moment you start earning any sort of income, whether you are a high school student with a part-time job working as a baby sitter or giver of the French fries. It’s a lot easier than it sounds to become financially independent, and I can tell you exactly how you can use one very genius, easy and simple trick to do this while you’re still living with your parents or working your way toward your goals.

But first, let’s talk about living with your parents and not paying many expenses. It happens to all of us at some point. We’re in high school or college and we work to earn a little extra cash since our parents aren’t looking to pay for everything we do (at least my parents weren’t). We have all this disposable income and we tend to be very frivolous with it. Expensive clothes, trips, fun events – we have the money to pay for it, so we do. And we have the money to pay for it because have no expenses. That lulls us into a false sense of wealth that will not do well for us in the future.

When the day comes that you move out of your parents house and have to pay rent, a mortgage or even just a car payment, life changes drastically; all that disposable income suddenly has to be allocated toward expenses and your feeling of wealth diminishes greatly. It’s a common problem, and it’s not a fun one. I remember when my husband and I went from living with our parents to moving into our newly built home when we returned from our honeymoon (don’t even get me started on the additional 6 months it took our house to be completed than we thought it would take) and suddenly we had a mortgage. That was a huge hit to us financially, even though we knew it was going to happen.

I wish we would have thought about this amazing trick to help us learn financial independence a lot sooner. So, what is it?

Living like you’re already paying monthly expenses even when you are not; and here is how it works.

You live somewhere rent/mortgage free. Most parents do not make their kids pay rent to them, so you have a disposable income. What you need to do is start paying your savings account a mortgage or a car payment each month – even if you don’t have one. Set aside what you can afford at the moment, such as $500 per month rent check and a $300 car payment. When you’re putting that into your savings account each month without allocating it toward actual expenses, it’s just growing your net worth and your savings. What this does is put you in an amazing position.

What is the benefit of this, you ask? Well, it’s simple. You don’t have to pay these expenses, but you get to build your savings and you get to teach yourself how to allot your money each month toward things that you will one day pay for. This not only helps you save, it helps you learn how to budget when you have additional expenses. It helps you learn how to live life when you have to put so much of your income away for certain things. And it helps you afford those things.

This is a fun fact – moving is not free or even cheap. One day you will move out, and you will have expenses to pay. Perhaps you will have a first and last month rent and a security deposit to put down. Perhaps you will need to put down money on a new home. Perhaps you will have moving expenses or new furniture to choose. There are so many things that will break your budget if you do not plan for it in that aspect of moving up and on.

That’s why it’s imperative you consider this savings plan now; to get you used to what you will face at a later date. You might have a few live and learn moments, but I think I speak for everyone when I say it’s far better to live and learn when it’s not ‘real’ than it is when you have a real mortgage and a real car payment.

Furthermore, this is a great way to help you build an emergency fund. Financial experts recommend that you begin this fund by saving $1000 to use in case of emergencies. From there, you should work to build your fund to accommodate six months work of your expenses so that you’re comfortable should anything unexpected occur in your life. It sounds nearly impossible to do, but it’s not when you use financial savvy and financial prowess.

It’s going to prove challenging, especially if you’re used to spending your money on whatever you want, but it will be worth it in the end. When your friends are ready to buy a home or rent an apartment and cannot afford to do it because of all those past vacations and those designer clothes, you’ll be able to do it. Sacrifice is not always easy, but it’s always worth it in the long run. Go ahead; take the challenge and learn to live a life of financial freedom now.

Photo by Tim Boyle/Getty Images


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