A million dollars is not worth what it used to be, but if you manage it well, it can last you a lifetime. While there are some retirement experts that say you need at least $3 million to retire, many in the FI community require a lot less without decreasing their quality of life. Once you realize what really makes you happy and start spending wisely, your excessive wants start to disappear and you might realize that you can retire early with a smaller bucket of gold.
It feels as if everyone wants to become a millionaire these days. Just look at how many folks run to get lottery tickets on weekends. Almost 50 million people bought Jackpot tickets a few weeks ago when it was at $310 million. That’s about 15% of the U.S. population. If your idea of being able to stop working one day involves winning the lottery, you’re going to need a VIP divine intervention! Your chances of winning the lottery on a single ticket is 1 in 175 million. Imagine if these folks had a different mindset and saved more for their retirement, instead of paying this stupidity tax. Did you know that 1/3 of the U.S. population has nothing saved for retirement? I wouldn’t be surprised if many of those lottery ticket buyers are also part of the crowd not saving any money for retirement. And it’s not just people that live below the poverty line that aren’t able to save for retirement. Take a look around, ask your friends and family, observe their behaviors. How much have they saved for retirement? Do you think they can do better?
Now, you don’t have to be a millionaire to retire comfortably, but you need to adopt one trait that self-made millionaires have, if you want to retire early. To accomplish financial independence and have the option of getting out of the rat race early, you must shift your mindset from a consumer to a producer.
What is the difference between the two? The difference between a producer and a consumer is that the producer makes a product or provides a service, and the consumer, uses or consumes the product or service that the producer makes. As a producer, you might not be involved in the day-to-day operations or management of a company that makes a product, but you might fund them as an investor.
Producers, such as self made millionaires, made their fortunes by producing way more than they consume. So there’s a direct correlation between producing more than what you consume and acquiring wealth. But how do we make the shift to become producers? If consuming is bad, doest it mean we need to stop consuming? Sure, we have to buy certain products and services in order to live, but we have to tilt the balance towards producing more than what we consume. To begin shifting our mindset, we must start to think of money as an investing tool, not a shopping mechanism.
How Consumers Use Money
The illustration below shows the path that is followed by a consumer who derives their income from a job.
It’s not a coincidence that economists label us as consumers. Any word that begins with con is bad for you: con artist, concussion, constipation, congress, c o n s u m e r . There was a time that US residents were called citizens, but with the rise of mass consumerism and the industrial revolution, the word consumer became more popular. You could have the world’s most beautiful nose, but if you’re bullied to believe the contrary, you’d grow up thinking that you have an ugly nose. If everyone tells you that you’re a consumer, you’re going to take that role and consume.
We’ve been conditioned to consume on a daily basis and companies pay top dollars to get inside our mind, and ultimately, our wallet. Almost every activity promoted out there evolves around spending our hard-earned money.
Consumers view their paycheck as a spending money tool, and by the time Monday comes, their money is long gone – hasta la vista, dinero! Then, they wait for the next paycheck, hoping that nothing goes wrong before payday comes, because they didn’t save for a rainy day. They might see a bonus or a promotion as an opportunity to buy a bigger ticket item or inflate their lifestyles. Saving tends to be labeled as a boring activity and probably the last item on their list.
When you consume your entire paycheck, the government and corporations end up consuming your life energy by default. As long as you keep working to buy more stuff, you’ll have to continue to show up at the office and pay more payroll taxes. It’s a vicious cycle that continues until you can no longer work. Then, you’re allowed to retire and finally have the time “to travel and enjoy your golden years”, while pharma keeps you alive past your 70’s with pills. Corporations continue to milk you all the way to the cemetery. Don’t be a sucker (AKA consumer), and start adding value to your life by becoming a producer.
How Producers Use Money
The illustration below shows the path that is followed by a producer who initially derives their income from a job.
Producers, on the other hand, see money as a tool to invest, create something of value or buy their time back. They live within their means and only buy what’s necessary, so that they can invest the rest of their money. They work for their money once, and then their money works for them indefinitely. This, in turn, allows them to become financially independent and have all the time in the world to themselves, if they so wish.
How Can You Make The Shift From a Consumer to a Producer?
If you open your eyes to the opportunities out there and change certain behaviors, you can also become a producer if…
- Instead of using social media to upload your countless number of selfies and keep up with the latest gossip, why not start a fan page to promote a business or a side hustle? Produce content that puts money in your pocket.
- Instead of paying interest on those credit cards, why not make some sacrifices to pay them off, and have the financial institutions pay you interest for your money, as you invest it?
- Instead of looking for ways to get entertained on weekends, why not start a weekend entertainment company? I have a family member who was on her way to college and started a children’s party entertainment company about a year ago, as a weekend job on the side. Today she hires others and pays them $50 an hour.
- Instead of only teaching the same lesson that you’re passionate about to your family or friends, why not make it available to the world by becoming a teacher at a site like SkillShare? No teaching experience is required, and according to their site, their average teacher’s earning is $3,500 a year.
- Instead of complaining about politicians and betting on the next guy, why not run for political office? Otherwise, it’s a complete waste of your time spending it on things that you can’t control.
- Instead of outsourcing everything in your life, why not bring back the chores, learn new skills and possibly make a side hustle out of it? I have a friend that started a credit repair company out of necessity. He found some errors on his credit report, took it upon himself to fix them, and before you know, he was helping others do the same. Today he has a successful credit repair and lending company that more than provides for his entire family.
- Instead of buying a huge house and paying interest to the bank, why not buy a smaller one to live in, and in addition, buy a rental property and have the profits from the rental property subsidize your own mortgage?
- Instead of thinking how can I spend this money I just made, think – how can I invest this money?
You’ll be surprised at what you can do when you start changing your money habits. When you get paid, analyze where that money is going and create a budget. What bad habits might be keeping you in the consumer loop?
I was not always great with money. I was in the consumer loop, until I realized that it wasn’t bringing me true happiness. I learned and replaced the old bad habits with kick-ass new ones. Now that I consider myself cured from bad behaviors, I see things in a whole new light. As producers, we add value to the world because we become less wasteful. We learn new skills along the way, we depend less on the system, and we create less waste and more value by cooking our own food, repairing our own devices, when possible, and installing things ourselves. (I just replaced our faulty car stereo after watching some YouTube videos!) It’s a healthier way to live, on a path to wealth that will one day free us from our daily jobs–no more working for the man! And you can do it too! Producing more than what you’re consuming is a trait that you can acquire as well. All you need is determination and a great attitude to begin the shift.
Do you consider yourself a consumer or a producer? What changes have you made in your behaviors to get better at saving and investing money, instead of spending it?