What is True Economy?

photo credit: srqpix

NOTE: The following are summaries of articles I have read from various sources and anecdotes. Even I have been recently researching the Internet for ways to gain financial independence. In doing so, I have compiled quite a number of materials of study. With this, I would like to share insights I have found and put into layman’s language everything I understood and I hope these would help financial-independence searchers get the inspiration they need for financial freedom.

It is an understatement to say that there are a lot of people in the world. There are already too much! I have heard somewhere though that in reality, there are enough resources for everyone. The problem lies in the unequal distribution of these resources that is why some have too many and others don’t have anything at all.

In an ideal world, everyone would live comfortably. There would be no financial stress, economic downfalls, currency fluctuations, etc. There are books stating it is not all terribly difficult for people in good health to make money. In our modern world there are just too many niches and market holes to provide opportunity and new vocations open up for everyone, any gender who is willing to engage in any respectable work for the time being may find lucrative employment.

It will entail hard work, sacrifice and motivation to get a certain level of independence but it is possible once people put their minds into it. But as any teacher in our society would say, you only have to put your mind into it, and adopt the proper means as you would desire anything else in the world and the deed would be easily done.

The hardest thing for every financial-freedom looking individual is to keep money. Agree right? The simplest solution we can think of is to spend less that what we earn. Most of us think that if we have some money left from our salary to stash in our banks, we are the happiest of mortals to have a bit for a rainy day. That is simple economy.

But a lot of people don’t realize a hole in this simple theory for individuals do the simplest mistake too.

Example, let’s take Man A and Man B. They both have high salaries. Yet every year, Man B gets something ahead and Man A falls short. Man A thinks he understands saving but he does not. The real scenario is, Man A cuts off expense to clothing, transportation and a bit of food allowance but squanders the left money to some gadgets and gizmos. He thinks squandering his supposed to be savings on gadgets as rewards for himself is beneficial when in it otherwise since he doesn’t really need those stuff at all. That is the common mistake we often make. We fancy we are so wonderfully economical in saving a
that we think we can afford to squander in other directions.

I AM GUILTY TOO. (eep!)

Or maybe, you are a female who spends less for transportation. You take busses instead of cabs or you walk a few blocks to save on some cash. You don’t eat much since you are keeping your figure. You don’t dine out since you know how to cook. I bet you have quite a stash but the problem starts when you buy every branded clothes and make-up you could put your hands on. Now hardly anyone will get rich with that kind of attitude.

Hardly anyone will succeed with this kind of attitude. I know. I’m in my mid-20s and I haven’t got much asset to say I own. I had my time of happy go lucky spending days as a yuppie. Now, I have really have to start saving for things I need and want as well as financially help around house expenses.

True economy would consist in making the income exceed the expenses. Old clothes could be worn longer with proper laundry. Live on house cooked food rather than constantly dining outside. If you could take a bus instead of a cab to go to work, do so. A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way
desired result is attained.

This would indeed require training and self-discipline but when one gets used to it, there will be more satisfaction for simple but comfortable living.

There is a recommended exercise by financial experts that could be a cure for unconscious extravagance each one of us may be undertaking. When you find you have no savings at the end of the year, and yet you have good income, you could take a few sheets of paper (or have a notebook) and mark down every item of expenditure. Post everyday or week in two columns, one headed ‘necessaries’ and the other ‘luxuries’. You will find that the latter column will be double or triple the length of your former. The real comforts in life cost but a small portion of what most of us can earn.

Maybe you could take on some advice from this video I found in youtube:

So think, what are your luxuries that you could live without? Maybe, these are the things that you could stash in an investment of savings for your future. As for me, I admit I have to cut down the amount of food I buy outside. I tend to try out a lot of food once I see something very appetizing. Now, I have to learn to control myself to cut off that luxury expense.

What are your luxury expenses that you think you could cut off?

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