For several years now we have stopped talking about dreams,
Who has time to dream, I say
About money I don’t like to share, I admit
About how every month I find myself in a real battle for survival
Employing myself to death and still for some unclear reason
Living from the current slip to the next one
Yes, most of the time I suppress
But eventually the same day of the month
It’s just a credit breakdown
Let’s talk about economic freedom for a moment.
The same concept that has been talked about a lot that holds the great promise of retirement at the age of 30… Just before you start imagining yourself lying in a bikini on Koh Phi Phi beaches, I’ll just say that the following article doesn’t deal with ways to retire early because in my opinion it’s not a solution or a sufficient goal (hint: you’ll be surprised but you’ll get tired of sitting on the beach all day, I promise) but we will talk about financial freedom in terms of how to make our lives debt-free, How to get the most out of our money, reduce our dependence on it and make it work for us and not the other way around.
According to data from the Central Bureau of Statistics for 2019, 42% of households in Israel are in overdraft for at least one month a year, many of them due to family members’ reluctance to deal with financial issues that make them feel uncomfortable, which causes them to postpone the matter as much as possible, which increases the lack of control over expenses and the lack of peace in their lives.
What is economic freedom?
Financial freedom is a choice in a more relaxed daily life – it’s about continuing to breathe a sigh of relief when called into an unexpected conversation in the boss’s office, having the option of deciding who to work with and who not to, to allow the child one more class a year, to extend maternity leave, to go out for a romantic dinner a week or simply to decide that the next weekend we will fly to Paris. Economic freedom is a concept that varies from person to person, but if we want to summarize the topic in one sentence – this is Our ability to make decisions in a way that is not affected solely by money.
Financial independence has two sides – the expenses side and the income side. You can find many articles online dealing with ways to increase our income, but this time I chose to focus on the expenses side, the side that many of us tend to forget. Access
encourages a shift in thinking and a deeper understanding of our needs and desires so that we can maximize the potential of the money we already have. After adopting the minimalist approach to my life, I managed to achieve true financial freedom in a few simple steps. You don’t have to be a big understanding of numbers to start implementing these steps in your life as well, here’s an explanation of some of them in a nutshell:
- Eliminate debt Debt is not a good thing, period, so it is the first thing to deal with (we will exclude mortgage debt or debt that is for leverage purposes for now), living with debt is a life full of stress that causes us to get stuck financially and mentally and even worse, causes us to sink deeper and deeper into an economic pit due to the compound interest effect. Debt prevents us from taking risks, making good decisions, fulfilling dreams, living.
- Spend less than you earn Do you live according to your income level? In other words, do your expenses exceed your income? Many studies have already determined that the more we earn, the more we spend. In the past, when my salary increased or I saved a little more money, the first thought that came to my mind was “how can I spend this” – I immediately upgraded my car, my house, my mobile device…. Remember, the best way to give yourself a raise is to spend less, if you really want to ever achieve financial freedom the secret is to keep Her Standard of living Even as soon as wages rise, the extra money created for you – save, how much should you save? The optimal situation is savings of 15-20% of wages.
- Re-examine your desires – So why prevent ourselves? You ask, after all, our wages are rising, so why don’t we upgrade our house, our car? The answer is that there is no need to withhold anything from ourselves, but it is worth reexamining our desires. We live in a world that takes abundance for granted and gets bored of it after a minute and are immersed in a culture that makes us believe that houses, cars and other objects will make us happy and so without feeling we lose sight of what our true preferences are and tend to spend a large amount of money on things we don’t really need and don’t give us real value. Before every expense, ask yourself, do I really need this object or service? Does this product give me value or real pleasure? You’ll soon find that your expenses will be dramatically reduced.
- Write down your expenses – An effective way to gain control and reduction of expenses, trivial as it may sound, is to record them. Write down every but every expense you incur from small to large – car, rent, meals, coffee, everything. Divide expenses into categories: food, clothing, housing, and more. The very act of recording and monitoring causes us to be in a state of control in which we know at any given moment what our situation is, at the end of the month we are required to account to ourselves and therefore without feeling we begin to think twice before every expense. There are a lot of great apps for recording and recording expenses, including 1money that I personally use.
- Dive in When we start recording expenses, many suddenly realize that for years they had no idea how big they spent on food or fuel, and even worse – many did not know that for a long time they had lost double payments to various companies or services they did not usually use. Gather as much data as possible about your spending and check – are you making payments you didn’t even know about? Go through each of the expense categories you have built and think about whether each expense actually gives you real value, if so, try calling the service provider and haggling over the price, you will be surprised how much money you can save just from a short check.
- T-H-S-C-W – Who is the richest? This is the preliminary saving even before it was needed. After you have eliminated the debt and started saving at a good time, it is recommended to open an emergency fund, one that will contain an amount equivalent to about 6 months of your monthly expenses because how can we put it in nice words – shit happens and we must prepare for it in advance. It is recommended not to touch this money, so try to close it in the fund in order to make it difficult to access. After you have saved enough for such a fund, you have reached the long-awaited moment when you can start enjoying the power of interest.
- Get to know the power of interest rates “Compound interest is the eighth wonder in the world,” Einstein said, “whoever understands it will profit, whoever doesn’t will pay it.” Unlike the debt situation where the compound interest effect only increased it for us, here we enjoy the opposite effect and let our money work for us. Every shekel lying in our checking account erodes over time due to inflation, and if there’s anything I’d like to tell a 20-year-old that I was, it’s – start investing! Yes, even if you only save $200 a month… Don’t let your money stand still.
- Don’t give up on your passions – After we have carried out all the reductions and tests it is equally important not to deprive ourselves of the things that make us happy and enjoy without guilt. In order to manage ourselves financially, we don’t have to sacrifice the here and now and avoid the pleasures of life, but simply live more consciously and create healthy priorities while silencing background noise.
The writer is Lital Shimoni Slivka – economist, consumer researcher and owner of the blog “Other Consumption”
, which creates discourse and awareness around the subject ofminimalism