Strange title right?
Well, I am sure most people will be able to relate to this.
Look at the above picture - the thrifty amongst us will likely cringe at this.
"You are supposed to squeeze the toothpaste from the bottom!"
Because, apparently that's how you make the most out your toothpaste.
Now, take a look at the next image.
When the toothpaste is about to finish, people then tend to use this technique, to squeeze whatever toothpaste there is left.
Okay, so what is the point that I am trying to make here.
What Happens When You Have Lesser
You see, when you are running out of toothpaste - two things happen:
1. You become more frugal and you try to make the most of what it is left available.
2. You become more creative and try all sort of techniques to extract that last drop of toothpaste.
Have you ever thought about how we can apply this same concept to our finances?
Just like a full toothpaste, when we receive money from our day jobs - some of us will tend to spend more money. However, as the toothpaste depletes, then we start to become more frugal while waiting for our next payday.
My question is this - why couldn't we be frugal from the start? Don't you think that will change your finances dramatically?
Well, the truth is that it is not easy to do...When we have money in the bank, it is hard to resist the temptation to spend it and reward ourselves. It is only when we are broke that we start to become frugal and eat economical rice.
How do we solve this problem?
Leave lesser in the bank
Well, here's how I do it.
The truth is that I have two bank accounts - one meant for receiving salary, and the other for investments.
I remember that my first pay check was around US$1600. The moment my salary comes in, I have set up standing instructions for the the bank to transfer $1000 to my second bank account, leaving me with only $600. And I will live within my means of that $600.
Now what happens when my salary increases to $1800? Well, now I transfer $1200 to my investment account and still survive on the $600.
The reality is that when most people have a pay raise or an extra source of income, they tend to increase their expenses as well. This could be a new house, new gym membership, new car, etc.
The biggest problem is this. Its emotionally easy to upgrade our lifestyle. But it is emotionally hard to downgrade it. That's just the simple truth of people's need for vanity.
However, here's the question we should really ask ourselves.
Do you want to "rich while looking average " or "be poor while looking rich"?
Very often, the people that I have met and are truly wealthy are those who dress very simply...
...and the opposite is true as well. The ones who seemingly spend all their money trying to look rich and extravagant are sometimes the poor ones.
The Bottom Line
Simply by changing our spending habits, we can have much more money to buy assets that actually makes us rich, rather than superficial things that makes us "look"
rich.
By creating the experience of having lesser cash than you actually have, that is how you become frugal, and very often come up with new ways to get more money to fulfill your needs.
Change your habits, and you will change your life.