Here's a new twist on an old New Year's Resolution: If you want to give yourself the security of financial independence, try budgeting the way many wealth accumulators do. The secret? They don't budget.
Your first reaction might be, "Of course these people don't budget! They have so much money that they don't need to."
That may be true for some of those who have money today, but I'm referring to people who want to remain wealthy or those who are "wealth accumulators." These are people who don't start out with money, but who build up significant wealth over time.
Many successful wealth accumulators don't follow a detailed budget in the traditional sense. Instead, they develop the habit of living on less than they make. They do this by setting clear priorities. Here is how it works:
Sounds simple, right? Of course, "simple" isn't necessarily the same as "easy." By now, if you've done the math, you can see that following this plan means living on as little as one-half to even one-third of your gross earnings.
If you're living from paycheck to paycheck, just barely managing to pay the bills, the idea of living on half of what you make goes beyond absurd. It probably seems impossible. It may, in the short term, be impossible.
Yet there are ways to live on less than you earn, even if to begin with it's only a little less. Share a cheap apartment with a roommate. Drive an old car that you don't have to make payments on. Eat at home. Buy used furniture and second-hand clothes. Get a temporary second job solely for the purpose of building up some savings.
What is most important is developing the pattern of living on less than you make. Fostering a frugal mindset is absolutely essential if you want to achieve financial independence. When you commit to saving first, even if you can only save a small amount, you have made one of the wisest financial decisions you can ever make.
This non-budgeting spending style takes away much of the pressure of trying to follow a rigid budget. There's no need to keep track of envelopes or categories. You've made the hard decisions first, and you get to spend everything in the checkbook.
Budgeting without a budget can turn you into a wealth accumulator. It works because you take your future off the top.
Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota's first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!
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