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Go on a Money Diet to Reach Financial Freedom Faster

How can going on a money diet help you achieve financial freedom?

To mark my husband’s 54th birthday we ordered Indian takeaway for delivery. This was our first restaurant-made meal since lock-down in March. Inadvertently, we’ve been on a money diet since quarantine, being unable to spend in our usual fashion. Our gym memberships are postponed indefinitely, restaurants and shops are closed, flights were cancelled, money spent on entertainment, massages, the house cleaner, school lunches, haircuts, and clothes shopping were all put on hold until the Coronavirus runs its course or we find a vaccine or treatment.

The only shopping we’ve done has been to buy a paddling pool online for the girls (in lieu of the holiday trip we’d booked to Portugal) and a rather extravagant chicken coop that my husband wanted as his birthday present. The only luxury items my husband has kept in place has been his Cross-fit membership and his personal trainer which he has been doing via zoom virtually. Everything else we’ve had to postpone or cancel.

In effect, we’ve been on an extended, unplanned money diet. This is a strategy I’ve written about in Coach Yourself to Success as a simple and easy way to reset your spending habits. I’ve done this money diet for 30 days a few times in the past, but never for 10 weeks. The extra time has been a real eye-opener.

What’s surprised me most is not how much money we’ve saved, which has been significant, but how little I’ve missed the shopping, dining out and all the luxury pleasures I thought I needed to fully enjoy life. Now that I’ve been forced to dramatically simplify my life, I’m seeing just how over complicated it was, filled with unnecessary distractions and activities.

What’s more, I think I may have actually cured my lifelong addiction to shopping. Even as a kid my mom said I needed a weekly shopping “fix” as I trekked a mile in the hot desert sun to purchase a tiny ceramic animal for $1 to $2 at the nearest shopping center in the Tucson suburbs.

These weeks of lock-down have enabled me to see how little all this spending makes to our happiness. In fact, as a family, I’d say we are happier now than before, despite missing contact with our friends and family.  I thought I’d feel deprived, but perhaps because we’ve all been in lock-down together, I don’t feel I’m missing out on anything other than the yoga classes at the gym. The real test will be when the shops reopen. I know how easy it is to fall back into old habits.

The virus has given us an opportunity to do very little, to hunker down with our children and focus on the simple pleasures in life. We’ve enjoyed cooking a leisurely family dinner together, doing a BBQ in the garden, watching a family movie together curled up on the sofa. The thing I’ll miss the most is not being able to visit my mother and all our cousins, aunts and uncles in America this summer.

What’s also curious is how I feel a little bit guilty for not shopping. My mom thought she’d use her stimulus check to support her favorite gift shops in town until she realized she needed new tires for the car. Americans have been indoctrinated that spending is the way to keep the country and the economy going. The country is built on growth and its citizens are called consumers for a reason. We may be more a product of the culture than we know or care to admit.

Could getting off the hedonistic treadmill be as simple and easy as a 10-week money diet?

The true test will be when the shops re-open. My husband is already back into his daily fancy coffee habit. Will we simply slip back into the potent lure of spending for fun and entertainment? How will we hold onto this newfound peace and simplicity?

One thing is for sure. I now see we need a lot less money to retire early than I had originally thought. It is a classic financial trap to keep raising the money bar. If you have a half million, then you think you need $1 million, then that somehow becomes $2 million just to be safe, then $3 million…it never ends. And financial planners, who rightfully stress security and caution, will encourage you to keep adding to your retirement pot–just in case. After all, the more money you have, the more secure you’ll feel (and the more your advisor may earn in commissions).

Unfortunately, or perhaps fortunately, our happiness, and even our sense of security, isn’t linked to money as much as we may think. Jennifer Kempson, the Glasgow based blogger writes that “It is only our distractions and altered incorrect beliefs that make us believe we need anything more than [our basic survival needs] in order to thrive and exceed our current situation.”

I recall another blogger discuss the merits of Lean FIRE, which means you have enough passive income to cover your essential living expenses such as food, shelter and basic clothing, medical, etc. This is in contrast to Fat FIRE which includes gyms, massages, travel, and other luxuries of life. I’d naturally assumed that I’d want Fat FIRE with all the luxuries I’d become accustomed to and have now changed my mind. It has taken 10 weeks of lock-down for me to realize that Lean FIRE is enough. We can cover the luxuries, if we still really want them, out of extra earned income in early semi-retirement. This means that if he wanted to, my husband could retire much sooner. For me, though, I love my coaching work and don’t plan on giving it up any time soon!

From a purely mathematical standpoint, by shaving $1,000 off our monthly expenses we need $300,000 less in our retirement investments. Another way of thinking about this is that you need to generate 300 X every monthly expense you plan to keep in retirement. If you spend $50 on coffees out, then you need $15,000 invested to cover that monthly expense once you stop working. You might decide that it is worth saving that extra $15,000 or you might decide it is easier to make coffee at home. The choice is yours.

Either you work longer to generate the extra money for the luxuries or you cut the luxury. This may mean that for many people, financial freedom is now within reach sooner rather than later. You can go for Lean FIRE and then find fun ways to generate the extra income for life’s luxuries with a hobby or lifestyle business. The more expenses you eliminate, the faster you’ll achieve financial freedom and the easier it will be to maintain.

I’m wondering how many others have come to the same conclusion. The simple life really is better and that so much of our spending doesn’t add real joy or happiness. I feel more calm and peaceful now than I have in years, despite the fact that there is a deadly pandemic out there. Bizarre, but true.

As Henry David Thoreau said in Walden, “Simplify, simplify, simplify!”

If you are interested in getting on the path to financial freedom faster, check out the FIRE Course here.

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