Most people equate shopping to buying things like clothes, cars, and electronics. It’s exciting, fun, and cool.
When people think of saving and investing, words and phrases like “boring”, “long term future”, and “I’m becoming my parents” comes to mind. The future seems so far away, while buying cool stuff is right now.
What if we changed our paradigm to make investing cool? What if we thought about investing like buying things? Because the truth is that saving and investing actually is buying things. So what can saving and investing actually buy you?
Out of the Paycheck to Paycheck Trap
If you’re living paycheck to paycheck, you’re consistently one paycheck away from financial problems. Saving a few months of living expenses in an emergency account gives you financial runway. You are buying time and peace of mind.
In the case of a job loss, injury, family emergency, or any other unanticipated problem, a few months of living expenses buys you time. You can be out of work for a short period of time and have the funds to cover it. You won’t have to make decisions between your family emergency and having enough money to pay the bills.
This ability to buy time gives peace of mind. I don’t know about you, but I sleep a lot better at night knowing I have some financial runway. I lived paycheck to paycheck for many years, and it was stressful knowing financial problems were potentially only a few weeks away.
To put it this way, saving a few months of living expenses will give you:
More Life Choices
When you have several months of living expenses put away, you will have more life choices. If you want to move to a new and exciting city, you’ll be able to make that choice financially. You can pack up, get in the moving truck, and find a new place to live without immediately having to worry about money or settling for a new job just to pay the bills.
With several months of financial runway, you can take a risk and try a new career. You’ll have the ability to leave your “safe” job if that’s what you want to do. Scott Trench, host of the BiggerPockets Money Show, often talks on his podcast about leaving a career that didn’t excite him to take a risk on a startup. He is now the CEO of BiggerPockets. If he didn’t have financial runway, he wouldn’t have been able to take that risk.
What if you got a new boss at work who was absolutely terrible? Without financial runway, you are dependent on that job and will have to work with that new boss until you can find new employment. Having a foundation of savings and investments will give you the option to leave a toxic work situation much more quickly.
Many people who have children decide that they want to stay home for a few years. If you have financial runway, you can make that choice without a lot of stress and worrying. If you don’t have the runway, you probably will need to go back to work. Even if you have the runway and decide you want to go back to work, it’s nice to know that choice exists.
At some point in your career, you may decide you want to take a break, or a sabbatical. If you’re living paycheck to paycheck, you won’t be able to do that without accruing debt. If you’ve built up your savings and investments, you can take that sabbatical.
“That Feeling”
This is a hard one to quantify. It’s “that feeling” that you’ve got a solid financial foundation. That your personal finances are moving upward instead of downward. That an emergency won’t destroy you financially. Knowing that an unexpected car expense won’t take months to recover from.
It’s that feeling of knowing you are going to work because you legitimately enjoy it. And that you would have a choice to leave if circumstances changed.
The feeling of knowing you can pay for a vacation in cash before you even step on the airplane. Or that you can go out to that new restaurant you’ve been wanting to try without it putting a hurt on your wallet.
The realization that you understand personal finances and have that part of your life taken care of. Giving you the ability to focus on the stuff that really matters.
Financial Freedom
Invest wisely for a long enough period of time and you’ll have enough to buy your financial freedom. Which means you will no longer have to work for money. You’ll be able to afford to pay for your housing costs, buy a new car, go out to dinner, donate to your favorite charity, and much more without having to work again.
That doesn’t mean that you have to stop working, it just means that you won’t be required to work to pay for your life. You’ll have the choice of what to do with your life without having to factor in acquiring more money by working. That is tremendous freedom.
So the next time you think about investing, don’t think of it as a sacrifice or boring. Think of it as purchasing your freedom, which is the ultimate splurge.
What would you do with financial freedom? How would your life change?
