Chances are that your complete existence will go through a major upheaval in the next years. Such disruption might be of a nature that you cannot imagine at present. New technology may render your job obsolete. Global competition could devalue your education. A major economic shift might put you out of business.
A simple way to protect your peace of mind
Luckily, there is a simple way to protect yourself. All you have to do is to adopt a frugal lifestyle. Reducing your present cost of living can be achieved in many ways, for example, by spending less money on food, lodging, transportation, energy, travel, entertainment, or insurance
The resulting subtraction from your present enjoyment will be more than compensated by gains in long-term security. Commit yourself to save regularly in order to create a margin of safety. Accumulated resources will allow you to face calmly any disaster that the future may bring.
A man who feels confident and serene makes more of his days than an anxious short-term thinker. Too many are those who live under the threat of a mounting pile of debt. They are paying a high price for giving away their independence in exchange for momentary pleasure.
The importance of creating a financial reserve for bad times
Do not fall prey to the delusion of stability. Reduce your current cost of living and create a financial reserve for difficult times because, sooner or later, they will come. If you are undecided about what expenditures to cut, make a linear reduction of 5% in all your budgets and take it from there.
In addition, it is a good idea to have a back-up financial plan for unforeseen situations. For example, no matter how good your health insurance is, its coverage won't be universal. Similarly, your protection in the field of liability indemnity might be less than you think. What would happen if, due to some unfortunate event, you were to lose your protection altogether? Do you have a back-up plan?
Overspending is frequently caused by overconfidence. People feel sure that nothing bad can happen to them. They overestimate their strengths and underestimate their risks. They place their future at jeopardy in order to enjoy transient advantages that will be quickly forgotten.
You will be better off if you reduce your current costs. Aim at creating an emergency fund to which you can resort in times of need. Even a modest financial reserve can do wonders to alleviate misfortune or adversity. Discard the delusion of invulnerability and assess your risks objectively. Make the commitment to save at least 5% of your net income every month.
The psychological benefits of rational living
Furthermore, leading a prudent and modest lifestyle has strong can deliver important ethical benefits. Do you believe that all ethical decisions are equally valid? Are individuals who save to buy a home morally equivalent to those who gamble away their salary? Would you take a loan to finance your medical studies in the same spirit as you would borrow cash to purchase a recreational boat?
Rational values align decisions with reality, leading man to certainty and prosperity. In contrast, relativism wears man down by trying to justify arbitrary choices. Happiness needs to be sustained by facts, not by excuses. Personal well-being cannot be maintained by means of inconsistent behaviour.
Frugality goes hand in hand with logic and realism. You will enjoy life more if you reduce your living costs and create financial safety for yourself. Pick up pen and paper and make a list of ten items of expenditure that you can cut without any negative impact on your lifestyle.
Make more with less by adopting an entrepreneurial approach to life. If you are committed to search for better alternatives, you will find them. If you remain alert to better opportunities, you will seize them. Give priority to safety over short-term pleasure. Serenity and self-confidence will be the result. Reduce your costs and enjoy life more.
For more information about rational living and personal development, I refer you to my book The 10 Principles of Rational Living
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