Wednesday, May 28, 2014

Why Is The Gap So Important?


I've been spending the last few months trying to widen the gap.

The gap between Income & Expenses. (Read: Freedom Check - April 2014)

Yes, you're right, widening the Income-Expense gap alone is not going lead you to financial freedom. But committing to it helps weaken the walls of the rat cage in 2 ways:

1) It will free you from the clenches of the evil debt monster


A large majority of us live on credit and/or have some form of debt.

Fun Fact: The average number of credit cards consumers had in 2012 was 1.92 - and the average debt per credit card that usually carries a balance is $8,220. (source)

If you're making minimum payments on your debt, you're literally throwing a glass of water at a burning building. But, if you keep widening your Income-Expense gap, then you'll be able to douse that fire with buckets full of water.

Widening this Income-Expense gap builds the financial discipline necessary for the great escape out of the rat race.

2) The Gap IS Your Freedom Bucket


If you don't have any debt, great! Is maintaining this Income-Expense gap still important? 

Yes.

The gap IS your freedom bucket - and freedom buckets will provide nourishment for your money tree. Thinking of investing in the stock market? You'll need cash. Thinking of investing in real estate? You'll need cash. Have a great business idea? You'll still need some cash to bring it to fruition. 

Your Income-Expense gap is part of your exit strategy. 

And widening this gap is going to give you more choices, more roads and more paths.

The day will come when you realise that the dent on the walls of the rat cage is now a hole.

Then you'll walk out.



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