Tuesday, January 17, 2017

Shrink Your Financial Footprint

In my personal finance e-book, Live Cheaply, Be Happy, Grow Wealthy, I often refer to "shrinking your financial footprint" as a way to build wealth more easily. Although I didn't make it up, the term "financial footprint" is not widely used, so I'll offer my interpretation.

We all leave footprints during our brief stay on earth. You've probably heard a lot about "your carbon footprint" which is related to how much energy you consume. The larger your carbon footprint, the more natural resources are required to sustain your existence. We're all encouraged to shrink our carbon footprints in an effort to preserve our environment.

Your financial footprint is how much money you need to fuel your lifestyle. The smaller your financial footprint, the fewer financial resources you'll require to lead a satisfying life. The less money you need to sustain your daily existence and pay for the things and experiences you value, the more you'll preserve to build wealth, which you can use to further enrich your life, and to support causes you care about.

The two footprints can be somewhat related. For example, someone who drives a gas-guzzling sports car will probably have a larger carbon footprint than a person with a well-maintained compact. And probably a larger financial footprint as well. The extra money spent on premium gas and higher insurance bills won't be going into the retirement fund or toward the kids' college education.

But maybe you want more than just basic transportation from point A to point B? Your vehicle is an expression of your personality, and driving that gas-guzzling sports car fulfills a dream. Fine. There may be other areas in your life where you don't mind scrimping in order to shrink your overall financial footprint. Like turning down your thermostat in winter. Boxing up your leftovers and stretching them into another meal. Resisting the urge to upgrade every time a new iPhone comes out. Packing washable clothes that mix and match so you can travel with only one roll-aboard.

There is a certain satisfaction in living within a smaller financial footprint. But you have to adjust your attitude to be happy with less baggage, to find joy in things and experiences that don't cost a lot of money. You have to stop worrying about impressing others with your consumption. Separate value from cost.

Once you get in the habit of shrinking your financial footprint, you'll feel less like the fat person, overstuffed from the all-you-can-eat buffet, and more like the trim person, invigorated after a bit of exercise and a nourishing meal of healthy-size portions.

What tips do you have for shrinking your financial footprint? I'd love to hear your comments.

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