Conor Richardson

  • Blog
  • Books To Read
  • About
  • Newsletter
  • Contact

Archives for March 2017

Socioeconomic Downsizing

March 27, 2017 By Conor Richardson Leave a Comment

Engineering financial success is the best way to get rich. Millennials need to learn this formula. The problem is that it runs dangerously juxtaposed to the ingrained social values of consumption and hyper spending. Raised in a world where having the latest phone, car, or clothes is the proverbial choice, it comes as no surprise that savings and delayed gratification are becoming extinct concepts. And why have it any other way? Millennials were raised during a time when having the latest and greatest toys and taking expense vacations was normal. But times have changed. The key to getting financial ahead is to realize that, as a generation, Millennials are economically behind their parents. So how do you catch up? The answer is by what I like to call – socioeconomic downsizing.

Millionaires through this blog have spouted tidbits of wisdom on how to save, where to spend, how to invest, and the freedom in financial savings. The quickest way to get rich, as Chris Sacca shared earlier, is to live well below your means. This choice, to actively live below your purchasing power, or to socioeconomically downsize, is the key to getting rich.

By definition, socioeconomically downsizing is the active choice to live one or more rungs lower on the economic ladder than your current incomes allows. Let’s look at an example. Jane and Bob, a happily married couple from Dallas, Texas, each earn $50,000. With a combined total household income of $100,000, they are in the top 28% of household incomes. They have two choices, to live high on the hog and spend like they are making $100,000 a year (which they are) or they can choose to socioeconomically downsize and only live on $50,000, or just Jane’s salary. With this choice comes a major lifestyle change in the amount they can spend on rent, food, transportation, and fun. This choice to downsize completely changes their day-to-day life.

Instead of living in the nicest part of town, paying a monthly rent of $1,100 (or roughly 20% of the monthly take home pay) the couple will now pay $580 – if they choose to downsize. Instead of spending $600 per month on new cars, Jane and Bob will now pay $200 a month – if they choose to downsize. Instead of taking two ski vacations this year, they will stay in town and enjoy a staycation – if they choose to downsize.

So why would anyone choose this masochistic path?

Because this choice will allow Bob to save roughly $30,000 per year (his after-tax income). Over time this will allow the couple to accumulate roughly $150,000 in savings in just over five years. Now instead of living “within their means” for five years, with the conscious choice to economically downsize, they will have accumulated 1.5X their household income in savings. Put another way, Jane and Bob have saved more in 5 years than the average 50-year-old.

Once the initial curtailment of spending is engrained into their daily habits, Jane and Bob will become remarkably acclimated. And as the savings for retirement, a rainy day fund, and an emergency fund are accumulated, Jane and Bob can start the process of looking for their dream house, a new car, or start savings for their future child’s college tuition. They have already put in the sacrifice early to accumulate their base savings quickly and can take enjoyment in watching their investments grow for the rest of their lives. For them, the hard part will already be over. Of course, all of these wonderful results only come about if they choose to downsize.

Be Jane and Bob. Socioeconomic downsizing is the quickest way to get rich and ensure the future you want. Fight the urge to spend and downsize your tastes for now so that in the future you can do as you please.

Filed Under: Behavioral Change, Debt, Saving Money

Meet The Author

Conor Richardson is an expert on Millennial money matters. His writing appears on outlets like Elite Daily... Read More ->

Newsletter

Archives

  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • April 2017
  • March 2017
  • January 2017
  • November 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016

My Daily Journal

Popular Articles

  • The Millennial Money Makeover
  • Books Will Never Die: A Proclamation Of Value
  • Revolving Novelty
  • Book Review: The Millennial Money Fix
  • The Art of Acquiescence

Recent Posts

  • The Millennial Money Makeover
  • Books Will Never Die: A Proclamation Of Value
  • Revolving Novelty
  • Book Review: The Millennial Money Fix
  • The Art of Acquiescence

Trending Topics

  • Behavioral Change
  • Credit Card Debt
  • Debt
  • Get Out Of Debt
  • Investing
  • Saving Money
  • The Rich Life
  • Uncategorized

Follow Me

Copyright © 2018 · launchyourfinances.com