Don't Live Like the Rich Part 2

I've been reading lately about increasing income to get richer and about cutting expenses to do the same. I want to point out the obvious, which is that you will actually have to do both. The tricky part is that you can't increase your spending once your income increases; you need to use that extra money to increase your savings, investments, or debt repayments. Once you decrease your fixed expenses to an appropriate level, you become virtually financially indestructible. I'll use myself as an example.

I was working as a tax consultant when I decided I wanted to attend graduate school. I didn't have any hopes of a scholarship, so I explored other payment options. I also never incur debt unless it is attached to real estate and at well-negotiated rates, so a student loan was out of the question, and since I can't incur debt I have to pay for everything in cash, including large purchases like an automobile. As a result, my fixed annual expenses are extremely low. So when I wanted to go to graduate school it wasn't a concern if I could afford it or not, my only concern was the opportunity cost of not working because I'd be in school for two years.

Eventually I worked out an arrangement with the school. We took the total cost of the program, divided it by 24, and I made those payments for the next two years with no interest. Many schools will make similar payment arrangements if you inquire.

Because of my planning and low fixed expenses, I was able to earn enough working three days a week at a local coffee shop to pay for all of my living expenses and tuition cost, even though I was only earning about 1/4 of what I had been earning as a tax consultant. I also had an emergency fund that could have sustained me for a year, so I never worried about what I would do if my fly by night barista job expired from circumstances beyond my control.

Once I was out of graduate school and back into the full time work force, my fixed expenses remained the same. This is a very powerful paragon, and one that you must achieve in order to obtain wealth through working.