Bad News: The “Normal” Life Will Wreck Your FinancesOctober 12, 2015
We live in a culture full of folks that are pretty good at selling us on ways to live our lives and spend our money. They’ve gotten so good at it, in fact, that there’s now a successive string of purchases that must be made in order to achieve what’s commonly known as a “normal” life:
Get married, buy a house, buy a new car (because you deserve it, right?), fill your house with luxurious items and furniture, have kids, take a vacation every now and then.
What’s the common link between these things? We’re told that each will bring a life-altering satisfaction, but they also involve gobs of money flowing in and out of your life. Within each of these events, there’s an industry somewhere ready to take advantage of your need to check them off of your lifetime to-do list.
Mrs. Saver and I have been called radical based on our financial choices. We’ve chosen to live a debt free life, share one car between us, and pursue a higher savings rate over a higher consumption rate. When we get an increase in our income, we get pretty excited about how much more money we’ll be able to save and invest. The perceived downside to this way of life is that neither of us has ever purchased a new car in our adult life, we aren’t home owners, and we rarely make big purchases unless we both deem it entirely necessary. The upside to this? Our net worth continues to grow, helping us further pursue our long term goal of total financial independence.
The contrast to this radical way of living is taking each new boost of income and using it to buy into another expensive event that you may or may not need (or be ready for) at that point in your life. The world is full of brilliant marketing agencies whose sole job is to convince you that these purchases are in your best interest. Is it always in your best interest to buy a new house? Maybe — do you have money put away for that very purpose? Better yet, do you have 20% of the down payment put away? If so, you’re pretty awesome. The last question is simple — can you afford to pay off the house?
So many people fail to ask themselves these basic questions. For them, it might only come down to an emotional impulse brought on by cultural or peer pressures. These impulses are death to your long term financial life. While one small impulsive purchase won’t wreck your finances, a lifetime of these “normal” purchases will only leave you in debt wondering where you went wrong and why you’re not as satisfied as everyone said you’d be.
According to most people, it’s “normal” to buy a house as soon as you become an adult. It’s “normal” to rush out and buy a car after your first big paycheck. It’s also “normal” to upgrade these items as soon as they start to get a little less appealing, because your peers certainly wouldn’t approve of a boring house that doesn’t fit your growing needs as a successful adult, right? If you feel this way, you’re only doing major harm to your financial life.
People around you tend to keep to themselves when you start buying houses and cars. In fact, they might congratulate you for successfully parting with your money. However, as soon as you start making “radical” money decisions, people may start to question your thinking. You know what’s not “normal”? — Investing most of your take home pay when you’re in your 20s. It’s also not really normal to ride a bike to work rather than spend money on gas. It’s decisions like these that always lead to a better financial life. What begins as meager saving will soon become a massive nest egg that allows you to pursue your long term goals. Becoming a hardcore saver and investor — especially when you’re in your 20s — will lead to some major wealth later in your life. In every money decision, question it fully before diving in. In the end, just try not to fall into “normal”.