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In our last post, I talked about the key to retiring early: by beating inflation twice - in both your earnings and spending. Now it’s time to get into the nitty-gritty details about how to do each.
If you’re going to grow “the gap” between your earnings and spending, here’s a mantra that can really clarify your vision:
Earn like a boss, spend like an intern
Today I’ll share what we’ve learned over the past 15 years about how to manage both sides of this equation, with the goal of getting you well set-up to do the same. Along the way, I’ll link to some books that I’ve read that have really helped me in each of these areas. Every book on this page is one I’ve read and loved.
How to Earn Like a Boss
Below are the methods and approaches I’ve used over the last 15 years to grow my income an average of 8% a year (definitely beating inflation of about 2.5% during that same time period).
I can’t promise these will work in every situation. That said, if the things below don’t bring you success in the company you work for, you may want to look for a different company!
1. Keep the mission first
When you and your team have something important you’re working on together, everything becomes a whole lot clearer.
Decisions are easier, priorities are clearer, and everyone just seems to work together better.
If you find yourself in a job where everyone seems like they are running around like chickens with their heads cut off, then there’s a good chance your team is missing a worthwhile purpose. What do you accomplish? Why do you exist? (and no, “to make money” is not a good enough answer).
Spend time talking with your team members and bosses about what the mission of the company and your team are so you can make the biggest impact there. Most other things are just a distraction.
Recommended Book on Team Purposes: Start with Why by Simon Sinek
2. Improve yourself
The skills or potential you showed that got you in the door at your job aren’t going to be enough to keep you successful for the rest of your career. You need to keep learning and growing.
Sure, your employer has an interest in contributing to this, but make it your responsibility to identify how you want to grow and how you want to do it.
If you’re struggling for ideas, go out and grab a few leadership/business books from the library or the bookstore.
Recommended Book on What Makes Businesses Successful: Good to Great by Jim Collins
3. Improve your team
Improving yourself helps your company a bit and you a lot. Improving your team helps your company a lot and you even more.
This might come in the form of sharing things you’ve learned with your team members. Or it might come in the form of suggesting and implementing improvements to the processes your team uses.
If you see something in your team that isn’t working, come up with a solution.
In the end, if you’re looking to make your team more efficient and effective, you will be a great asset to your business and show that you’re more than a person who can “do the job” - you’re a person who can “improve the job”.
Recommended Book on Things That Are Often Wrong In Teams (And How To Do Them Better): Rework by Jason Fried and David Heinemeier Hansson
4. Take on the hard or undesirable jobs
This is one of the biggest ones. There are always going to be pieces of a job that people avoid because it’s hard or undesirable. These things always get left for last and the person stuck with them usually complains about having to do them.
I’m going to suggest something unconventional. Volunteer for these jobs.
Undesirable jobs are ones that can almost always be improved (see #3 above) and hard jobs are the best places to learn (see #2 above). By tackling the jobs that nobody else wants, you’ll also show major initiative, which will go a long way with your bosses.
Having a reputation as an employee that has a clear understanding of the mission, is continuously improving themselves and the team, and is willing to take on the tough jobs puts you in a position of being an employee that every manager wants to keep around. When you do this, you’ll find yourself better able to advocate for raises, promotions, and increased responsibility.
Taking this road gives you the ability to increase your income at a rate way faster than inflation, which puts you on the path to financial freedom.
How to Spend Like an Intern
Ok - the income side is looking good. Now let’s take a look at spending. Below are the methods we’ve used to keep our annual spending growth to roughly 1% a year over the last 10 years (much better than inflation at 2.5%).
But first, some backstory on what my life as an intern was like :)
I had an 8-month internship during my time in college and it was a great experience. Beyond all the benefits of building my career, one of the best things that came out of it was the financial environment.
I was making pretty good money - better than any hourly job I’d had in high school or over summer break. But even though the money was coming in, I was still living on-campus in the same environment I’d been in while I was getting my degree.
I hung out with the same friends, did the same activities, and lived roughly the same lifestyle. By spending like I was still a student, I ended up padding my bank accounts quite a bit during those 8 months. It didn’t really hit me until years later what the important lesson was here, but it’s an eye-opener:
1. Your spending can (and should) be independent of your income
It’s that simple. The fact that someone makes $100,000 doesn’t mean they need to spend like they make $100,000. Some people in this situation spend like they make $200,000. Others spend like they make $50,000. Either way, there’s a lot more choice in spending than what most people think about.
Here’s another lightbulb - when you get a 10% raise (or 5% or 3% for that matter), you don’t have to increase your spending to go with it.
It’s tempting to look at increases in our income as an opportunity to “reward” ourselves for a job well-done. But what’s a better reward - blowing your raise on an overpriced new car with higher insurance costs, or using that money to secure your financial future?
I know it may sound boring, but future you would be delighted if your raise went toward paying off your mortgage or buying months or years of freedom.
So, how do you keep to the mentality of spending like an intern even while your paychecks grow?
2. Remember that you can have fun no matter your lifestyle
Look back at the times in your life that you were the happiest. Most likely, the reason you were happy wasn’t because of some infinite pile of cash at your disposal.
No, most likely your happiness came from a different kind of abundance - relationships, purpose, or adventure.
If you can find joy and fulfillment in life without incessantly swiping the credit card, then why wouldn’t you go that route?
Rather than “investing” in stuff, try investing in your friendships, family, skills, knowledge, and experiences.
But won’t you feel deprived if you’re not buying all the shiny new toys?
3. It’s not about depriving - it’s about prioritizing
Remember that it’s not deprivation if you’re prioritizing something better. If you’ve got dreams for a life that’s got more freedom, more travel, and less stress, then choosing to spend less now is putting what’s most important to you at the top of your list.
Take the time to think about where you want your money to go. Do you want to buy new furniture every 12 months to keep up with the latest styles or do you want to travel the world?
Do you want the convenience of not having to cook or do you want to eliminate that last bit of debt?
Do you want to spend on short-term conveniences or do you want to invest long-term in your values?
Your answers might be different from mine. But until you take the time to think about these questions and ask yourself what your values are, you can’t know whether your money is going to the right place.
Recommended Book on Prioritizing: The More of Less by Joshua Becker
So how can you make sure you’re sticking to your values in your spending?
4. Track your spending
As the quote goes, “That which gets measured gets managed.”
If you want to know whether your money is going toward your values, the best way is to track your spending.
We’ve used Thrifty to track our spending for the last three years and it’s done wonders in our ability to measure and reduce our spending. We’ve found a ton of bad spending habits that we’ve been able to fix, saving us thousands of dollars a year.
Plus, as a bonus, tracking our spending means we’re not only able to grow our gap between our spending and earnings - we’re able to measure it and see it improve over time!
Putting It All Together
So, there you have it. Putting these two together should put you in the position to beat inflation both on the income side and on the spending side. If you can do that, you should be well on the path to early retirement. From there, you can refine and improve your approach on both sides to get there even faster.
What about you? Any tips on how to earn like a boss or spend like an intern that you’ve used in your own life?