Financial Lifestyles

Bill Parrott |

The stock market has been less than kind to investors these past few weeks. The Dow Jones has dropped 3.75% and the Nasdaq has fallen about 7%. Investors have reacted negatively to rising interest rates, mid-term elections, and a trade war.

When it comes to reaching your long-term financial goals, the stock market is the least of your problems. What’s worse than a declining stock market? Your spending habits. How much money you spend and save will impact your financial future more than anything else.

If you spend less money than you make, your chances of financial independence rise dramatically. Achieving financial independence is not hard if you commit your time and resources to it. It’s easy for me to calculate how much money you’ll need to reach this pinnacle and to start moving you towards this goal.

Unfortunately, if you spend more than you make, you’ll never become financially independent because you’re leveraging your future. Debt payments and loan obligations will hinder your ability to save money and give it away.  

A byproduct of living a leveraged life is stuff. Do you have a stable of items you rarely use? Is your driveway littered with vehicles collecting dust? Do you own a vacation home you seldom visit? If these items are dragging you down, sell them and pay off your loans. For example, if you own a boat, but only use it a couple times per year, sell it and rent one instead. Take an inventory of your big-ticket items to see how much you’re paying for each one and how often you use them. It makes financial and common sense to get rid of things you hardly use but constantly pay for.

Having too much debt robs you of building margin in your life. Your cash flow is a precious thing and it must be used wisely. Once you start reducing your monthly debt payments, you can start building an emergency fund. After it’s established, invest more money towards your long-term goals.

Do you monitor your spending? A tour through your bank and credit card statements will help you identify where your money is going. In addition, reviewing your paystubs and tax returns will reveal much about your financial life. Are there expenses you can reduce or eliminate?

As I mentioned, it’s easy to calculate how much money you will need to achieve financial independence, but how much do you need to be financially content? How much is enough? It’s almost impossible to put a figure on contentment, because you’ll always want more. It doesn’t matter how much you own, because someone will always have a bigger home, faster car, or nicer boat. A question I’m often asked is: “How do my assets compare to others?” Relative wealth doesn’t matter.

What can you do with your resources if you’re financially independent? Can you give it away to help others? Can you establish a foundation that will benefit a generation or two? You may find contentment in helping others.

Christian Smith and Hilary Davidson, authors of The Generosity Paradox, found: “Generosity is paradoxical. Those who give, receive back in turn. By spending ourselves for others’ well-being, we enhance our own. In letting go of some of what we own, we better secure our own lives. By giving ourselves away, we ourselves move toward greater flourishing. This is not only a philosophical or religious teaching, it is a sociological fact.”[1]

In Proverb 11:24-25 it reads: “One person gives freely, yet gains even more: another withholds unduly, but comes to poverty. A generous person will prosper; whoever refreshes others will be refreshed.”

Bill and Melinda Gates have been using their wealth to change history and save lives. They created the Bill and Melinda Gates Foundation with an initial donation that instantly made it the largest foundation in the world. The current assets of the foundation are more than $50 billion and they operate in 130 countries.[2] They have more money than they’ll ever be able to spend, so they decided to give the excess away.

You don’t need the resources of Bill and Melinda Gates to make a difference. If you manage your cash flow and spending habits correctly, you too can change lives and make a difference.

The stock market has fluctuated for centuries, so don’t worry if it’s up or down from one day to the next. Instead, live below your means, save money, help others, and good things will happen.

Keep your life free from love of money, and be content with what you have, for he has said, “I will never leave you nor forsake you.” ~ Hebrews 13:5


Bill Parrott is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.