Spend your way to financial freedom

We often talk about spending at Tiller because we’re convinced spending is the most important ingredient in achieving financial freedom. No matter how much you make, if you’re not careful about how you spend you’ll go broke.

“Sure, but if I get that next promotion, or take that better job, won’t I be better off?” Maybe not. You might make more, but if you’re like most of us, it’s nearly automatic that you’ll spend more. A higher salary means we can buy the better car. Remodel the house. Take a fancy vacation, right? Those may be possibilities with a new higher income, but the truth is, if we want financial freedom, we’ll make greater and faster progress if we’re focused on our spending.

Speaking of making more money, a quick quiz: who has created more wealth, Mike Tyson the prize fighter or Ronald Read from Vermont?

The financial stories of two men; one famous, one not.

Mike certainly made more money. Lots more. He made $30 million per fight for a while. That seems like a fast way to make money, but he found ways to spend the money even faster. Mike filed for bankruptcy when he was deeply in debt. He literally fought hard to make a third of a billion dollars in his career. Then, a swipe here, a click there. Spent. Gone. Vanished.

Who is Ronald Read? Ronald made much less as a gas station attendant in rural Vermont. However, he saved much of what he made. He lived modestly and was financially free. He amassed an $8 million dollar fortune by the time he died, passing it on to benefit numerous charities, including a major gift to a library and hospital. That’s living the good life, and then paying that good life forward after you’re gone.

Ronald isn’t alone. Every local paper has stories like these regularly, and most of these quiet millionaires don’t ever make the papers. These are people who live thoughtful lives without excess, earn modest incomes, and surprise those around them by leaving significant wealth to charity when they die.

In the other realm, Mike Tyson isn’t alone as a high earner who dug an even bigger hole. Mekhi Phifer’s net worth is reported to be minus $1 million. Ditto for Randy Quaid. Chris Tucker and DMX both have reported net worths of minus $10 million. Our goal isn’t to make light of anyone’s financial situation. Being that deeply in debt is frightening and tragic, but as Warren Buffett says, it’s always better to learn from others’ mistakes than make those mistakes ourselves.

Your ticket to wealth

So for all of us who want to begin the journey towards financial freedom today, what’s our next step? Spend thoughtfully. Sure, it doesn’t hurt to reach for a higher income role, especially if we love our job. Investing strategy matters too (hint: put it in an index and check it once a decade). That said, the real ticket to wealth is that credit card in your pocket or purse. Use it wisely.