Frugality, Wealth & Avocado Toast

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There's one simple idea that has made a huge difference to my personal wealth:

Make More Money & Don't Spend it.

This is something I happen to be good at and I'm grateful that I created this habit a long time ago.

This habit is massively powerful because it lays the foundation for building wealth. To get an idea of how much of a difference it makes, you can experiment with this:

Income Expense Playground Sheet (click here)

The better you are at increasing your income AND reducing your expenses, the more rapidly you move from broke to wealthy.

Of course, what I'm talking about here is frugality and frugality is not cool.

In fact, maybe you're wondering if I'm one of those boomers who complains about "kids these days" and their expensive lattes and avocado toasts...

But that's not the case. Let's understand the context of frugaily and the complaining-about-avocado-toast phenomenon with a bit of context:

Building Wealth Used To Be Easy...

Sadly, not anymore.

Previous generations were playing the wealth building game on easy mode.

For example, look at the graph below.

The line shows us the price of an average family home in the US from the 1950's to 2021.

Around 1950, the average 1 family home sold for under $20,000 and that home could be worth close to half a million dollars today...

This simply means that on average, our parents and grandparents made an incredibly good investment just by buying a home (which was a reasonable and affordable thing to do, back then).

Why is it So Much Harder to Build Wealth Today?

To understand how much harder it has become to build wealth, consider this:

This graph shows how rental and real estate costs have increased, relative to median incomes. And what we can clearly see is that both housing costs and rental costs have risen more sharply than median incomes, from 1960 to the present day.

Around 1960 or earlier, an average worker could reasonably save up enough money for a down payment on a home - and they'd be able to pay off the mortgage within a few years, too.

Today, you'd have to save for much longer to even afford a down payment - plus it's harder to save because if you're renting, that's taking a bigger chunk out of your income than it used to.

Prices and incomes have developed in such a way that it's MUCH harder for people to get off the wage treadmill today than it used to be.

Key Takeaways

  1. Make money and don't spend it - this is the power move for financial freedom.
  2. Increase the gap between your income and expenses - wealth comes from this gap.
  3. Minimalism means you can spend less money without compromising life quality.
  4. We can't assume that what worked for previous generations will work for us. We have to take a more active role in our personal finance if we want to build wealth.

Action Steps:

  • Create a copy of the Income Expense Playground Sheet (click here)
  • Play around with your numbers to see how your wealth can grow

Would you like to receive reminders to finish this course? (click here)

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