It’s a meeting. But it’s no ordinary meeting, and certainly not a Zoom meeting…

MB pen, checked. R watch, checked. EZ suit, checked. B shoes, checked. Not forgetting cufflinks too. Are we presentable enough for the meeting now?

Let’s also show our peers what vehicle it is that we drove to the hotel. After all, it’s not just about what you see at the meeting, but the journey there too.

By the way, this decked-out appearance isn’t a one-time event. New year, new work goals, unchanging social goals…

Yes, that was Collin’s past life. A (rat) race to not be outdone by his peers in the industry. To use social proof that he was successful and doing just as well, or even better than them.

But after the star-studded affair, it’s a snap back to face the mountain of bills, loans, and expenses…

Financial freedom map outflows

In those moments, retail therapy functions like a drug. You crave for the pleasure of picking out (luxurious) goods and swiping your seemingly limitless card. The anticipation of onlookers noticing your shiny new artefacts gets your blood pumping.

Unsurprisingly, the pleasurable effects wear off. Those “high” moments not only don’t last, but result in a vicious cycle of buying, hoarding, and slogging. You think you need more, but you find yourself spiraling down…

Game plan to conquer outflows: Mindful spending

I’m all for supporting the retail sector and rewarding myself with things I fancy. However, it has to fit within the larger picture – the conquest on the Road To Financial Freedom.

When it comes to the game plan to conquer the continent of outflows, the strategy is to adopt mindful spending. Rather than thinking of how to save money, think of how you can spend less.

Mindful spending brings an awareness of how you think, feel and act as a steward of your finances. You have a deeper consideration of the impact of each expense. It means to be conscious of the 5W1H (who what when where how why) when it comes to your expenses.

Remember, half the formula of the financial freedom game play is to reduce expenses. To achieve financial freedom, your income (inflow) needs to exceed your expenses (outflow). By reducing your outflows, it would make the amount of inflow needed more achievable.

To conquer this large outflow territory, let’s look into 3 key strategies which tackle questions of why, what and when.

financial freedom start with why

On “why”: Don’t keep up with the Joneses

Who are the Joneses, and why should we try to keep up with them? Interestingly enough, this phrase was given life from a 1913 comic strip titled ‘Keeping Up With The Joneses’ by American cartoonist ‘Pop’ Momand. Source: WordHistories

Depending on your social circle, it could also have been ‘Keeping Up With The Seows’…

Jokes aside, notice that it is a question of “why”. For what good reason is there to chase after material goods, or try to emulate a lifestyle that is beyond your means?

It is imperative to start with why. Understanding the reason and motivation behind your actions will help determine if it is a worthy course of action.

For instance – does it really matter if you also have that pen that the Joneses have? Must the artefacts hail from certain renowned maisons? Does your vehicle of choice have any real influence over your peers and clients?

Are these reasons convincing enough to justify the kind of expenses you’re incurring?

The question of why tackles your innermost desires, and serves as a driving force behind your actions. If you find yourself trying too hard to come up with persuasive reasons to maintain an extravagant lifestyle, it is time to rethink your life goals.

Because then, financial freedom is perhaps not as important to you as you thought it was.

Depending on the level of importance that you place on achieving financial freedom, you would strive to reduce unnecessary spending. Especially when the reason is to impress people who don’t actually matter.

Sidenote: If the earlier phrase “start with why” rings a bell to you, it is because that is also the title of Simon Sinek’s book. I’m certainly adding this to my reading list.

quality over quantity expenses

On “what”: Quality over quantity

Now that we’ve determined why we need to incur certain expenses (and also leave some out), the next strategy is a little subtle, but no less powerful.

What to buy, and how much to buy. Sounds rather like the conversation surrounding the stock market, right?

Actually, in the game of financial freedom, the tactic is the opposite of trading the stock market. One approach in trading the stock market is to concentrate on multiple shares (e.g. 100 shares) in a few select stocks (e.g. 5 companies).

But when it comes to financial freedom, it is not wise to own multiple items (e.g. 100 pens) from a few select brands (e.g. 5 companies).

I can think of little merits in hoarding multiple items (100 pens) which provide the same function (writing). Even when there is undoubtedly room for usage, it is the habit and vicious buying-cycle which is an obstacle to financial freedom.

Ladies might relate to the example of having multiple lipstick/lip balm/lip gloss. Having multiple products is so we have different shades for different occasions to suit our moods and outfits, right? (It’s a consolation that lipsticks also range widely in prices.)

quality over quantity lipstick expenses

But the fact is, the more variety of lipsticks, the less chances of fully utilizing any singular product. That is, it becomes a rarity to even finish a particular stick. Chances are that you would already have a few favourites among the lot, and the remaining would expire before we know it.

Upon disposal, the empty space may look like there is room for more… And this results in another cycle of buying and hoarding. Thankfully for lipsticks, the relatively low price point seldom results in slogging to pay for the card bills.

But you get the point. Why buy so many, when you only need so few?

The tactic is to go for quality products instead of the quantity of them. As the saying goes – you pay for what you get (一分钱一分货). Invest in quality products, and the likelihood of them being used for a longer time is higher too. Which means, less expenses in the long run.

This brings us to the next strategy of tackling the question of when.

On “when”: Delayed gratification

Let’s assume you have laid out your justifications about a quality purchase. When do you decide to act upon that desire?

If only the answer to the question of “when to buy” was as simple as “buying when a replacement is needed”. That discipline would truly be an advantage when it comes to levelling up in the financial freedom game.

The challenge lies with the ability to execute delayed gratification. It means that opposed to instant gratification where you get what you want NOW, you are able to exercise patience and wait for the fulfillment of your pleasure.

By the way, there have also been studies conducted on the topic of delayed gratification. The famous Stanford Marshmallow Experiment (1972) was simple – either the child gets 1 reward (marshmallow) now, or waits to receive 2 rewards (marshmallows) later. Follow-up studies further revealed that children who were able to wait longer tended to have better outcomes in life.

financial freedom stanford marshmallow experiment

The ability to control your impulses gives you room to reconsider the purchase. It could also be an act of saving up to afford a quality product, rather than settling for one of less quality to fulfill the need for immediate satisfaction.

A trick that I use is to tell myself to wait for promotional periods. Interestingly enough, there are times when the desire for the product has gone away when the sales season finally comes around. It proves that my buying reasons weren’t able to stand the test of time after all.

Which is good, because then, I avoid spending on something I didn’t really want. That small but powerful habit brings me closer to financial freedom.

(Bonus) On “how and where”: Research first, execute second

In the spirit of adding value to you, just like we often do in the SMT community, here’s a bonus section to tackle the questions of “how and where”.

Putting the above strategies together, you might notice that conquering the continent of outflows involves conscious decisions as frequent as on a daily basis. Unless you’re somehow able to live self-sustainably, spending is an unavoidable part of life.

How and where we spend can also result in reduced expenses. Nowadays, cashless payments have become increasingly accepted as a result of the digital acceleration due to COVID-19. It goes without saying that e-commerce is a big part of that shift too.

online shopping credit card expenses

In that context, it is important to decide how we are making payment. Simply put, research comes first – what is the most appropriate mode of payment? Which credit card suits my spending habits best? Are there any rebates or promotions with my purchase?

Plus, when it comes to “where”, it is not surprising to find some items online retailing for less than they are sold in physical shelves. Again, research plays a part in this. It pays to be a savvy consumer!

On “who”: You’re the cheerful protagonist

In Collin’s story, reducing expenses and living a simple life were the first 2 processes which he had identified to exit the rat race. As you can tell, these actions are not meant to revolutionize your life overnight. Rather, practicing mindful spending is a skill. It’s a time-honed process that brings you closer to financial freedom.

Having said that, it does not mean that we should be stingy and unwilling to indulge. That would be a rather miserable life! Be wary NOT to make money the master and you, the servant.

You’re the protagonist in the conquest of financial freedom. While it is important to work towards clearing this game, it is no less vital to enjoy the game play too. What is life without enjoyment, right? So…

  • Spend when you need to.
  • Put the dollar where it’s worthwhile.
  • Be grateful for what you already have.
  • Reward yourself when the time is ripe.
  • Allow for room to give.

If you’ve mindfully done all that you could to reduce your expenses while being contented with life, congratulations! You’ve conquered the continent of outflows. That’s a big part of the map, and a significant achievement unlocked.

If you’ve not been conscious about your spending and the concepts in this article seem foreign and overwhelming, take it step by step. Reflect upon your last purchase, and whether it was avoidable or reduceable.

As for me, I’m glad I decided to cook something up instead of ordering my lunch in. It sure seems like a healthy and wallet-friendly way to keep going.

 

Stay tuned to the next parts of this series as we forge ahead into the terrains to be discovered and conquered, and focus on practical, actionable steps which you can take.

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