Ever since I wrote about leaving my corporate job, a lot of people have asked a lot of questions, many of which revolve around finances.
How are you going to make a living? How are you going to pay your bills? What expenses do you still have? What expenses do you get rid of? How can I apply this to my life when I still have to deal with X and Y and Z?
First, a note: Living a meaningful life has nothing to do with how much money you make. I used to make a lot of money. I don’t make nearly as much now. Not even close. And that’s okay because contribution and growth and cultivating your passions are more important. That said, we all need to pay the bills, right? I mean, we’re minimalists, not communists. And minimalists aren’t allergic to money. Money just isn’t the primary focus of my life.
Let’s start with how I manage expenses. As you can imagine, I like to keep it simple, so let’s look at it in a way that will apply to anyone: regardless of your income, you must spend less than you take in, otherwise the math does not work, and you will go into debt if you spend more than you make.
This might sound overly simplistic, and yet more people are in debt today than ever before. The average American has four credit cards in his wallet. And I know this first hand. I used to spend more than I made, even when I was making well over six figures. It didn’t matter because I was spending more money than I brought home. That will never get you ahead. Never.
This all sounds like common sense, I know. But the problem is that common sense isn’t that common these days.
Bottom line: You must spend less than you make. Until you fix this part of the equation, the rest does not matter. First you must realize how much money you truly need to survive, and then realize that everything beyond that is just a want, often a superfluous want.
I realize that your situation is different from mine, but that doesn’t mean you have an excuse; it doesn’t mean you can keep putting it off; it doesn’t mean that you have to remain trapped in a job or situation you hate, in a life without freedom.
Because everyone’s situation is different, I want you to have some resources to tackle your finance and debt problems, so I wrote a separate essay called Financial Freedom: 5 Difficult Steps to Get Out of Debt, Create a Simple Budget, Plan for the Future, and Regain Control of Your Finances, which includes a step-by-step plan to help you through your process.
Let’s talk about absolute expenses. These are simply the things I must pay to live my current lifestyle:
- Rent (includes trash and water)
- Utilities (gas and electric)
- Car Insurance (I don’t have a car payment)
- Gasoline (for what little I do drive; I walk when I can)
- Food (including tips; don’t be a jerk, tip well)
- Savings (including retirement accounts like 401k, 403b, Roth IRA, etc.)
- Health Insurance & Medical Expenses
- Cellphone (optional)
- Gym Membership (optional)
That’s it. I didn’t include totals because yours will obviously be different. So plug in the numbers for yourself, and that’s what you need to live. For me these expenses don’t count money for things I want to do outside of my absolute expenses, things like concerts or movies or other events that require money. But those things are optional, and I don’t have to do them. If I don’t have the money to do them, I don’t. I can be content just sitting in a quite room by myself.
A note about health insurance: if you want to leave your job or start your own profitable business or are already self-employed, I still recommend having some type of health insurance. Sure, some people don’t have health insurance, but there are options for non-corporate people. The most common options are as follows:
- Purchase a high-deductible policy
- Check prices with the Freelancer’s Union
- Compare quotes with an insurance broker
- Get insurance through your spouse’s employer
- Move to Massachusetts or take lots of vitamins
A note about your savings account: it is important to have an emergency fund saved that you don’t touch. Rule of thumb is three to six months of basic living expenses (food and shelter). Adam Baker shows you how to make money from selling your crap; that’s a great way to build up some quick savings.
Expenses I Eliminated
These are the expenses I used to have, but got rid of (over a two year period):
- House payment (sold the house)
- Homeowner’s insurance (sold the house)
- Car payment (paid off the car)
- Cable TV (got rid of my TV)
- Internet (I go elsewhere for internet)
- New clothes every month
- Credit card #1
- Credit card #2
- Credit card #3
- Credit card #4 (Yes, I had four credit cards. No, I am not kidding. I still owe a little money on one of them and plan to pay it off this year.)
- Student loans (paid off)
- Other miscellaneous debt (paid off)
- Junk (yes, I used to buy a lot of junk, but I’m not buying that stuff anymore)
Trading Money For Freedom
One principal I live by is questioning all my purchases. It takes time to earn money, and my time is my freedom, so by giving up my money I’m giving up small pieces of my freedom. Before I make a purchase (even for a cup of coffee) I say to myself, “is this cup of coffee worth $2 of my freedom?” This has significantly changed my mindset.
Once people know how much money they need, they always want to know how to make that much money so they can leave their soul crushing job or find a job that they enjoy more that might pay less. These people often say, “but I don’t want to write or start a website to make a living.” I say, that’s OK! If you start a website like this one with the intention of making money, you will probably fail. Yes we make some money from this site now, but that’s not why we started it. But that’s not your passion anyway, so…
First, you must identify your passions. This one is easy for some people, and you might already know the answer. If you do, that’s great.
But if you don’t know the answer, Jonathan Mead does a beautiful job explaining the keys to discovering your passion.
Me? My Passion? Writing. I would write until my eyes fell out and my fingers were bleeding on my keyboard.
What about you? What is your passion? Do you want to start a profitable business? Do you want to teach children? Do you want to start a blog? Do you want to write a novel? Do you want to become a scientist? Do you want to travel the world? Do you want to feed the homeless?
Click here to watch Larry Smith’s TED Talk about why you likely won’t pursue your passions.
Second, you must identify your mission in life. This one’s a little more tricky and even a bit philosophical. Sometimes, if you’re very lucky, your mission is the same thing as your passion, but it’s all right if it’s different, too (it’s different for me).
Another way to look at this is to ask yourself, “What is the meaning of my life?” OK, I’ll admit, this is an extremely complex and esoteric question, so let’s remove the complexities. Regardless of the answer’s specificity, the answer always revolves around two things:
- Personal growth
- Contributing to others
In other words, the meaning of my life is to grow as an individual and contribute to other people in a meaningful way. And the good news is that you get to decide how you’re going to do both.
Growth. I grow in several ways, most notably:
- Writing & Reading strengthens my mind and my craftsmanship, and it also strengthens my relationships because we have interesting topics to discuss
- Exercise strengthens my overall physical and mental health
- Relationships allow me to connect with others to get new ideas and learn more about myself through conversation
Contribution. I contribute to others in several ways too:
- Charity & Community Outreach. I donate my time to charitable organizations; I also organize larger teams to participate at local community outreach events
- Coaching and Mentoring. I help others when they are looking for direction
- Writing. Great writing contributes to readers in a special way: writing can connect with another person on a level that other forms of entertainment are incapable of doing
How about you? In what ways do you grow? In what ways do you contribute? How would you like to grow and contribute? Make a list and pick your top three in each category. Focus on those, they are your mission.
Liberating Yet Terrifying
Once you do this—once you discover your passion and mission—it’s eye opening. It’s liberating. But it’s also terrifying.
It’s liberating because everything changes for you. You feel new and excited and free. Now you have something to focus on, and your life has a purpose, it has a meaning.
It’s terrifying because you realize that the life you’ve been living has been total bullshit, you realize that you must change, because if you don’t change then you’re essentially dead.
This might sound like hyperbole, but I assure you it’s not. It’s the cold truth. You are either living a meaningful life or you are dead inside.
Good luck on your journey into freedom. You deserve to be free.
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