So how does one become financially independent? Let’s define financial independence as no longer needing to work to live out the rest of your life. It’s really not that hard to accomplish. The large majority of it is making small lifestyle changes that pay off in huge ways. It’s critically thinking about what makes you happy in the long term and not just the short term (but there’s also room for that too!). And it’s most importantly about having the financial security to truly do what you want for the rest of your life.
There’s a lot to learn about when it comes to the heavy duty financial stuff (stocks, bonds, index funds, etc.), but you don’t need to know about all that stuff yet. You don’t have any reason to learn all of that because until you make lifestyle changes, you won’t even have the funds to mess with any of that financial stuff in the first place.
But where to begin then? There are a myriad of areas in life you can tackle. There’s diet, health, budgets, debt, entertainment, housing, shopping, bills, to name just a few. Let’s start with bills, because I feel like that is the least controversial of the topics I just mentioned.
We all have a lot of bills to pay. For me personally, I have rent + utilities, which entail Internet, water, gas, and electricity (all of these are split evenly with my roommate). But how can we minimize the bills that we have to pay? Let’s tackle them one by one.
Let’s start with Internet. This is a place where I don’t think you should skimp. Paying a premium for a relatively (I say relatively because the US overpays enormously for our pitiful speeds) fast connection is worth every penny. Don’t just buy the cheapest plan you can find! Whether you like it or not, the world is highly connected through the Internet today and having a slow connection is just asking for a headache. For my half of the Internet bill, I pay about $40 for a 50 mbps (~6.25 MB/s) connection with Comcast. I wouldn’t get anything under 25 mbps honestly, especially if you ever want to stream anything.
Somewhat related to Internet is cable. Unless you really enjoy sports, having cable is stupid. Any show you want to watch is available online in some form another. Get a Netflix account if you don’t already have one and enjoy thousands of movies for $8 bucks a month. Watch stuff that’s not on Netflix with Hulu and even YouTube. And if you want to take it to the next step, learn how to torrent safely and intelligently so that you won’t load up your computer with viruses watching streams from sketchy streaming sites.
Next up is water. I don’t know about you, but I’ve been taught how to conserve water since elementary school. Don’t leave the water running when you brush your teeth. Don’t take baths take showers instead. Don’t use the dishwasher, hand wash everything (and when you’re hand washing, don’t run the water at full blast, half is usually enough). Drink water from the tap (or the fridge if you’re fancy) and don’t buy bottled water. Not really sure what else to say here. Our water bill fluctuates between $50 and $70 total for the two of us.
We have a gas powered oven, and the only thing to decide about it is whether to choose once a year if we want to have a locked in low rate, or a variable rate that could be higher during part of the year and lower during a different part of the year. Other than that, there’s not much to optimize here. Use your oven and make cheap meals at home, it’s worth the gas cost compared to eating out all the time. Gas usually runs between $40 and $50 a month between the two of us.
Electricity is probably the place where most people can improve. Whenever people come over to visit, they always remark how dark it is when they step through the door. That’s because if no one is in the room, then the lights are off. Period. Whenever you leave a room, even for a second, you should be hitting that switch.
We also have electric heating/cooling. By keeping your thermostat warmer in the summer and cooler in the winter (and wearing weather appropriate clothing), you can save quite a bit of money. I usually don’t let it drop below 74 degrees in the summer or get higher than 66 degrees in winter when I’m awake in the apt. Keeping your thermostat at “room temperature” is a good way to lose hundreds of dollars a year for minimal comfort. You can stand a little heat and cold, you aren’t going to die from heatstroke or hypothermia. Our bill ranges anywhere between $65 to $90 for the summer months, but usually comes out to around ~$75.
What’s even more important than this though is what I will call heating/air cycling. Chances are that you don’t spend all day at home. You’re a busy person with a social life that likes to go out and see people, places, and things. While that’s great and all, your heating/air isn’t doing much good keeping your place nice and cool while no one is home to enjoy it. Most places built in the last 10 years have a programmable thermostat which you can utilize to set the heating/air to come on automatically at certain times in the day.
What you want to do is set the temp to be cooler at night and let your place naturally warm up throughout the day. When you get back from your day out, you can then lower the temp back to a comfortable level. This is my schedule for the summer: Around 11pm, I lower the temp down to 70. While I’m asleep, the apt stays at this nice and cool temperature. Around 8am, I set the thermostat to only cool when the temp. goes above 78 degrees. This means the apt is slowly warming up with the day, but who cares? No one is home to be uncomfortable.
The next time the AC kicks on is around 4:30pm, which is usually when I get home. I bring it down to a comfortable 74 degrees. And yes, 74 is a comfortable temperature for the summer. It’s not the money wasting 68 degrees of room temperature frigidity, but it’s also not “Wow, am I still outside?” 80+ degrees of summer. Put that hot young bod of yours to work keeping you cool in the summer. You’ll find that after a week of this, you will adapt accordingly and you’ll feel at ease while others are busy complaining because their fragile bods can’t handle a little summer warmth.
And since you’re saving a boatload of money on your bills now, feel free splurge a little and order another ice cold drink of your choice to keep cool, cause you’ve sure as hell earned it.
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