There are so many budgeting tools and programs out there that all say the same thing: scrimp, save, sacrifice, defer and delay. Essentially, spend all your mental energy on what you can eliminate. But that’s reductionist thinking rather than production thinking, and if there’s one thing I’ve learned in my life, it’s that you can’t save yourself rich. Even if you end up with a good sum of money decades down the road, what good is money if you don’t enjoy it. There is a different way, one where you can enjoy the process along the way.
I tried shrinking my way to wealth once. I read The Millionaire Next Door in college, so when my wife and I got married, I threw out the option of moving into her parents’ basement. What a great way to save money, right? Her response stopped me dead: “Rent free and sex free too.”
I allowed room in our budget for our own place, but my mind was consumed by what we spent and how we could reduce or eliminate those expenses. My wife and I got into arguments about the utilities being too high or if she bought resources for her classroom as a teacher. It was a miserable existence, one I wouldn’t wish on anyone.
Dale Clarke, a contributor to my book Budgeting Sucks, knows what I’m talking about. In 2005, Dale showed up at the first full day event we ever hosted because I’d been working as his dad’s financial advisor. Dale’s dad bought him a ticket, and when he heard there was free food, he decided to attend (true story). Dale was a miserable miser who spent less than $ 5 on holiday and birthday presents for his kids, often going to Goodwill to do his shopping. It drove his wife crazy. She once told him, “You’re obsessed with money. It’s all you talk about.”
Eight hours later, after going through our Curriculum for Wealth, Dale’s life was changed. He told me, “I’m going to become financially independent within a year.” I told him that was a bold proclamation since most people achieve this goal in three to seven years if they really work at it.
But Dale was determined. He spent twenty hours a week investing in himself and growing a portfolio of real estate properties. He wanted to escape a job he hated: designing airplane engines, especially since he couldn’t stand the smell of the burning gas and oil. Sure, the job had good benefits, but they didn’t benefit Dale. He was 70 pounds overweight. He had a retirement plan, but at the rate he was going, retirement was decades down the road.
After 362 days, Dale was financially independent. He was able to quit his job and started doing something he enjoyed, working in finance. Over the next five years he was making 10 times more money because he expanded his means, and focused on value creation rather than budgeting.
Oh, and he’s 70 pounds lighter.
How Dale Did It
Dale did three things that allowed him to become financially independent in a staggeringly short amount of time. We’ll get to those three actions in just a moment, but first, I can’t skip over the transformation that kickstarted his journey. Before he could take the first step to becoming financially independent in one year, Dale had to completely change how he thought about money.
He discovered that wealth is something far beyond accumulation.
Here’s why: accumulation has you believe that wealth is a function of how much money you can put away and how much risk you can take.
Here’s the problem: this is a slow process that neglects cash flow and invites unnecessary risk. You have likely heard that high risk=high return. But risk equals a chance of loss and one of the reasons people do not achieve financial independence.
What Dale had been led to believe was actually a failed financial experiment, retirement planning. It doesn’t work. We know that now, yet most of us stick to it because it’s all we know. We are told it is complicated or that we don’t have time to worry about it, just hand your money over to the professionals. But Dale took a different route. When Dale saw the possibility before him—to become financially independent and enjoy life—he took it.
Dale not only is financially independent and just moved into his dream home, he is also living better. He took his wife on a dream trip to Hawaii. They also went to Europe multiple times a few years ago, where Dale played the violin because he used to be a professional violinist.
Dale never would’ve done this without first shifting his mindset. It was that shift that led to his financial shift, which was made possible through three distinct actions Dale took.
#1: Deliver More Value
Dollars follow value, so the first thing Dale did was make himself more valuable. He studied up on real estate and invested in properties that could offer people value in the form of a home.
As income came in from those properties, Dale kept investing in himself and the business. He bought more properties, which allowed him to serve more people. He was able to upgrade his properties, which served his existing clients in a deeper, more meaningful way.
This is production based thinking. It was a radical departure for Dale, who had blisters on his fingers from squeezing every last penny. His sole focus used to be living within his means, but as he learned at our event, there are three ways to do that.
1- Budget and cut back.
2- Be more efficient so you can keep more of what you make.
3- Expand your means. Dale expanded his means.
By investing in knowledge and relationships you can create more value, which then allows you to make more money.
#2: Create an Automated System
Automatically save, then deliberately invest. In other words, pay yourself first. The easiest way to do that is with an automated structure. I’ve seen it countless times that those who don’t automate usually fall victim to Parkinson’s Law, which says as your income increases, your expenses will rise to meet or exceed that increase. It’s why people buy a new house or a new car after getting a raise.
If you spend two dollars for every dollar you make, get your spending under control first, budgeting is the right step for you. The key is to set up a separate account and automatically sweep money into it each month. See if your payroll service will deposit one check into your checking account and a separate one into a savings account.
This can build up a “peace of mind” fund. With this fund, you’ll have staying power and won’t be wiped out by one financial setback. You won’t have to borrow on a credit card to pay for an unexpected health crisis or cash flow crunch.
That’s an important rule that Dale followed: he didn’t borrow to consume. He borrowed to invest, but for his expenses, he used the cash on hand rather than credit.
#3: Find People Who Challenge You
To achieve something he’d never done before, Dale had to find people who challenged him to think bigger and better. He needed cheerleaders and advocates who excited and inspired him, but also held him accountable.
Dale found friends who pushed him closer to his goal and did business with them. They were the rocket fuel that propelled him to economic independence in less than a year.
The key is progress over perfection.
Not some day in the future—now. You can’t save yourself rich, and even if you do, there’s a very small chance you’re going to enjoy life along the way. Why not take the steps to gain financial independence while also loving every step of the journey? You can do it if you offer more value, create an automated system and spend more time with people who challenge you to be your best self.
So, the question isn’t about what you have. It’s about what you’re going to do.