You again find yourself waiting on that next paycheck, you got bills coming up quick. This one’s gotta go to rent and utilities and your car. You’ll have to make those payments towards debt next time, and you sure as hell can’t put that money in savings.
Living in luxury doesn’t have to mean making millions or working overtime all the time. In fact, there’s a very simple way to figure out how to never want for anything, how to be debt free, how to and how to start putting away money. The secret is how much of your money you’re funneling into rent.
Just think about it. If you work full time, that means you’re spending all day, five days a week at work. Let’s say that you do this mainly to pay the bills, but your biggest bill is where you live. Is it sinking in? Let me try phrasing this another way- you spend 5% of your time driving, and 70% of your time working somewhere to afford a place you only spend 25% of your time, 12% of which you’re asleep.
This isn’t something I came up with by myself. It’s the result of advice from smart people, and from a simple equation. The answer to how much you should spend on rent is actually really simple: you shouldn’t spend more than about 25% of you income on your place.
That leaves 75% of your income for other bills and taxes, for repaying debts, for your car expenses, to put in savings, to spend on things or experiences, or even to work less hours. It’s an equation geared to how people actually spend their waking hours, and one that prioritizes abundance.
There’s a dangerous cycle we are prone to getting trapped in, and it’s the same as the paycheck to paycheck life. Each moth, you’re putting nothing of your pay in savings, half or even more to rent, and the rest to bills and other living expenses. In that situation, there is no growth, and you are held hostage as a human bill payer. In that lifestyle, you are in always in survival mode, which is the opposite of an abundant lifestyle.
If you want to follow the equation of abundance, you have two options:
Option one is to increase your income.
This is perfectly doable, and there are tons of side hustles you can start doing to earn extra each month. You could work more hours, ask for a promotion, or just start looking for a better paying job. The downside to this option, of course, is potentially spending more of your time at work.
Option two is to reduce living expenses.
There are lots of ways, big and small to do this. For example, think about how much you spend on entertainment. I mean really look, because it’s always more than you think. It includes how much you spend on fancy coffee and snacks everyday, how often you go out to eat, what you pay for cable television, your magazine and book budget, and whatever you spend on things you don’t really need.
The next step up is to reduce your living expenses with location. It’s no secret that some areas are more expensive than others. Like how living in the neighborhood downtown is more costly than the neighborhood just a few more miles away. Hell, even some entire states are more expensive than others. Arkansas is certainly a different economic climate than Hawaii. It all depends what your priorities are, and if you can find the same things for less elsewhere.
Maybe though, you don’t want to live in the middle of nowhere. You like the big city, your state, or the ritzy town where your friends and family are. For this situation, the best thing to consider is downsizing. Not just small everyday things like in the first example, but on bigger life expenses. An example of this is your car. A brand new car, as everyone knows, depreciates in value as soon as you drive it off the lot. Especially if it’s just a personal commuter rather than a commercial investment. Same with electronics like cell phones, which can now cost upwards of a thousand dollars before your cellular plan. Buying used or refurbished whenever possible can save you thousands on major purchases.
Another way to downsize, and the route I advocate for, is literally the size of your house. How much space do you really need? Do you actually use your big backyard? What could you save if you lived somewhere with just one bedroom fewer, or if you went all out minimalist. Consider rent that’s just $400 a month.
Waiting to win the lottery is no strategy to start living more abundantly. What opportunities would open to you if your rent was reduced to a quarter of your income?