Leaving Work Behind

A Brief Guide to Money

Written by Tom Ewer on May 29, 2014. 24 Comments

MoneyMoney – and your attitude towards it – is as important as just about anything in life.

In fact, I firmly believe that creating a healthy attitude towards money represents half the battle when it comes to leaving work behind. Not only does spending less mean that you have to earn less, but having a genuine respect for money can help you to build a successful business.

With that said, in this post I want to lay bare my ideals when it comes to money – how one should think of it, treat it, and (most importantly) spend it.

What you’re about to read isn’t an argument for frugality, nor an argument for minimalism. It’s just how I see things.

Making Consumerism the Enemy

Many of us are working ourselves into a nearly grave, all in the name of material wealth.

This is something I have come to appreciate more as I have begun earning – and spending – more money. For example, in the last three months I have rented a new flat ($2,000 per month) and purchased a new car ($1,300 per month in loan payments alone).

Jaguar XKR

But it only took me a few weeks to learn a valuable (yet costly) lesson: while my new flat and my new car nice, I don’t need them.

In fact, in a way, I don’t even want them.

I want nice things in a sense that I enjoy them, but I don’t want them because of what they represent: work and stress. To purchase expensive things, you must work hard, and to afford expensive things on an ongoing basis, you must keep earning enough in the long term. Moreover, expensive things are typically expensive to maintain and replace, which in itself can add an extra layer of stress.

It’s like I’ve had the tiniest taste of the good life, and it’s left a bitter taste in my mouth. For a guy like me, it turns out that nice stuff isn’t all that.

The 80/20 Principle and Material Objects

It seems like you can’t swing a cat in the blogosphere without reading about the 80/20 principle, but I can’t avoid its relevance in this case.

Consider for example my girlfriend’s apartment.

It might seem like a strange thing to mention, but bear with me. The apartment costs $1,250 per month. It’s a nice place – roomy, with decent furniture and an en suite bathroom.

My apartment costs 63% more than hers. Is it 63% nicer? No. While you can’t really quantify such things, I couldn’t reasonably say that my flat is any more than say 20% nicer than hers.

So, I’m paying a big premium for something that’s “a bit” nicer.

Let’s take it one step further, because it’s not just about how “nice” something is – it’s also (primarily?) about how much happier it makes you. So I ask myself: would I be any less happy, generally speaking, if I lived in an apartment like my girlfriend’s? I’m sure you can guess my answer.

Which ultimately means this: in renting my flat, I am paying 63% more in the name of consumerism. It isn’t really making me any happier; it satisfies a certain material desire. That’s all.

To bring this back to the 80/20 principle, my point is this: I believe that you only need to spend a fraction of what you could spend on any given item to get most of the benefit(s). For example:

Spend any more than what is necessary to fulfill your core desires, and the value of your spending in terms of how much happier it will make you decreases rapidly.

Avoiding the Spiral

Of course, you could ignore me and aspire to earn more and thus spend more. In fact, that strongly motivates some people to succeed.

But there’s a problem with this approach: nothing is ever enough. You’ll follow an endless and ultimately fruitless path, because when it comes to material ascension, nothing is ever enough. Today’s dream car is tomorrow’s norm, at which point, you want the even more expensive car.

Financial equilibrium will be the most you can hope for. If you always purchase what you can afford – not what is good enough – your appetite will grow in line with your earnings. Ten years down the line, you might earn ten times as much but have no greater liquid wealth, all because you were chasing the next most expensive material possession.

And if your income decreases – well, then, you’re screwed.


If me earning a little more these days has taught me anything, it’s that security trumps more valuable material possessions every time.

I’d much rather have enough money in my account to allow me to retire early than have a bigger house or a better car. That’s what we should be aiming for – not bigger and better things.

I’m on the way to paring my outgoings down to about $2,500 per month, which would require about $3,400 earnings before tax. At that rate, if I live to 90, I’ll spend about $2.45m during the rest of my lifetime. If I retire when I’m 65, I’ll have to earn about $70,000 per year from now until then to provide the necessary money during my retirement years. (A disclaimer for the financially minded: I’m ignoring inflation, annuities, investments, etc., in the interests of simplicity. In reality, with prudent investing, I could retire on far less.)

So, one of the big life goals I have is to shorten my retirement age. My goal is age 45 today, but I’m hoping it’ll be much shorter before long.

I should point out that my plan is not to actually retire at 45. What I am in search of is complete security – a complete absence of financial worries. (I haven’t even mentioned that yet as a good reason for battling consumerism, incidentally.)

A New Way of Thinking

So that’s the theory, but how do we put all of this into practice? Well, most of it is mindset.

Let’s consider the absolute basics: if you spent nothing, you wouldn’t need to earn anything. You may reasonably argue that spending nothing is impossible, but in terms of your mindset, that’s where you should begin.

I’m not going to tell you to start drawing up fancy spreadsheets and whatnot; I just want you to start evaluating every purchase you make, in real time, by a new set of principles.

Cost and Value

The first thing you’ll want to consider is the cost of every item you buy in relation to your earnings.

Once upon a time I considered this simple – you should figure out your hourly rate, and compare every purchase against that. So, if my hourly rate is $30 and I want a new $600 TV, I know it’s “worth” 20 working hours.

However, I have come to realize that the above calculation misses out some key variables. First of all, money earned does not equal money spent. If I spend $600 on a TV, I need to earn more like $900 (before tax) to purchase it. That 20 working hours is now 30. You need to add about 30% (or more, depending upon how much in taxes you pay) to anything you buy to understand the real cost.

But that’s not all. Every penny spent is a penny that you could have saved or invested gone AWOL.

Consider the magic that is compound interest. If I don’t spend $600 on a TV and instead keep my old set, that $600 at a net 5% investment return over 30 years becomes around $2,600.

Put simply, items cost far more than their ticket price in reality, and spending money on anything damages your future security. Therefore, you should consider each purchase accordingly.

The Only Two Questions You Need

So, you need to consider every purchase you make carefully – from the biggest down to the smallest.

Now you may argue that saving a few pennies on a tiny purchase won’t make any real difference to your financial health, and I’d agree. However, this is more about developing a consistent attitude towards purchases. You should think about all purchases in the same way in order to create a well-formed habit.

To consider your purchases you need just two (or three) questions:

  1. Do I actually need this? (And by extension, if not, is it going to benefit you so much that it justifies the cost?)
  2. Do I need to spend this much, or can I spend less and still benefit as much, or nearly as much?

I have come to realize that there is no real way of quantifiably assessing the worth of any given purchase (unless you can get the exact same thing for less elsewhere). Ultimately, you’ve got to be disciplined and rely upon your own internal calculator. It’s up to you in the end.

I cannot stress enough that the above questions should apply to all purchases. All but the most frugal of us spend money unnecessarily – whether it’s on a fancy brand of coffee, an expanded cable package, a gas guzzling motor, or any other number of things.

You shouldn’t feel like you have to make sweeping changes today, but it would really benefit you to start shifting your mindset and see where it takes you over time. You might soon find yourself changing your mind about what you really need.


I hope that with the above, I have given you a mental framework with which you can make better decisions about your purchases.

I’m certainly not the finished article when it comes to this process (far from it), and I don’t think being financially aware is something you can become 100% “effective” at. All I can say is that we can all benefit from carefully considering our attitude towards money and material possessions. Just remember that every single time you take your wallet out of your pocket from now on.

Photo Credit: Philip Taylor

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24 Responses to “A Brief Guide to Money”

  1. Ricky Willis
    May 30, 2014 at 3:52 pm

    There was a time when I would make purchases, however big or small and not give it any real thought.

    Things changed though when I realised we were in a big black hole of debt and worry!

    Now when I feel like splashing out I ask myself 3 questions. 1. Did I need this item yesterday? 2. Do I really need this item tomorrow. And 3. Do I really need this item today?

    Depending on the answer to the first two questions, the third one takes care of itself.

    It is nice to have nice things but that’s all they are. Things.

    I, like you Tom would rather have financial security well before retirement age.

    Great post!

    • Tom Ewer
      June 3, 2014 at 2:47 pm

      Thanks Ricky! Good questions to ask yourself, that’s for sure. The key is that we all come up with our own ways of figuring out the right thing to do, regardless of our given method!

  2. Zoe Uwem
    May 30, 2014 at 7:32 pm

    Hey Tom,
    Remarkable post!

    One thing that’s very clear here is the importance of having a meticulously planned financial life.

    Spending carefully is a discipline -a controlled behavior- and should be practiced consistently for the best result.

    • Tom Ewer
      June 2, 2014 at 3:11 pm

      Hi Zoe,

      I’m not so sure about meticulous planning to be honest – like I said in the post, it’s more about having a certain attitude towards your purchases on an ongoing basis. If you want to take that to the next stage and fire up some spreadsheets though, it certainly won’t hurt 😉



  3. Robin
    June 3, 2014 at 8:06 am

    This definitely spoke direct to me. Thank you, Tom.

    For years I have always wrote things down a spreadsheet. What I spend and needed to pay. Gave myself a projected amount of money I thought I needed to live on if I left my full-time job. Can I “live below” what I really needed and cut back to leave my job? I downgraded to the lowest cable and how much TV do you really need. Not missed it. Instead of buying distilled water, I bought a counter top water system. I think more about what I do with money, than ever before.

  4. Debashish
    June 3, 2014 at 3:42 pm

    This is a great way to think about money, Tom.

    A couple of weeks ago my smartphone (2.5 years old) stopped working. I tried a few different things but couldn’t get it to work. This led me to consider buying a new one. On one hand I was excited by the prospect, on the other I simply couldn’t justify the purchase as my old phone still fulfilled all of my needs. This week I bought a replacement battery and got the old one working again. I can’t tell you how happy I am that I didn’t have to purchase a new phone. I am sure the satisfaction of a new purchase would have faded away after a couple of weeks. But the satisfaction of having my needs met without spending a lot lasts much longer.

    By the way, is your new car the one in the pic, Jaguar XK??

    • Tom Ewer
      June 3, 2014 at 5:58 pm

      Smartphones are a great example Debashish – I’m planning on running mine (iPhone 5) until it dies!

      As for the car, you’re almost spot on – it’s a Jaguar XKR 🙂

  5. Virginia Balogh-Rosenthal
    June 3, 2014 at 6:28 pm

    “The point of allowance is to bankrupt the kids,” said my husband (who has worked in bankruptcy law for over 20 years.) This means we gave our children a set amount of cash each week with the requirement that they buy a lot of their own things.

    It did’t take long for them to figure out that if they used the money to immediately buy a lot of candy, they wouldn’t have enough for that toy they wanted, so they began thinking longer term and saving up for certain goals.

    Two important rules we had were (1) we never gave advances on allowance and (2) they had to use their own money to buy presents (even quite modest ones when they were quite young such as a $1 pack of tissues or gum) for family members for Christmas, birthdays, Mother’s Day/Father’s Day.

    Many parents tie allowance to chores but we chose to use it to teach them a valuable lesson about money: there is a finite amount that needs to be apportioned according to their personal desires and goals.

    • Tom Ewer
      June 4, 2014 at 12:01 pm

      Hey Virginia,

      If more people taught their kids about money in the way that you did, I wouldn’t need to write this post! Thanks for sharing 🙂



  6. Evan
    June 3, 2014 at 11:08 pm

    I agree entirely.

    I would add aiming for more suburban sufficiency – sourcing what you need locally when you can (largely fruit and veg at the moment). Solar panels can be a worthwhile investment too (if you own where you live).

    These things being about security rather than money in the short term. But growing and swapping fruit and veg with neighbours can be financially very worthwhile too.

    • Tom Ewer
      June 4, 2014 at 12:02 pm

      Definitely a worthy ideal, if not something all of us are willing to do. I do this only becoming a greater focus in the future though. Thanks Evan!

  7. Erik Emanuelli
    June 4, 2014 at 11:35 am

    Some solid points, Tom.
    Very interesting!

    I have come to your own conclusion, over the years, only recently.
    After having worked so hard to own a home (a nice mortgage), a fast Kawasaki motorbike, a BMW car, and many other material things, I got to the point of not having liquids.
    And asking myself : Do I really need all these stuff?

    From now on, I will aim to investment, liquidity, and how to retire as soon as possible!
    Cutting definitely buying unnecessary things.

    Thanks for the article, Tom.
    Just recommended and shared on Google+.
    Have a great rest of the week! 🙂

  8. Jenn Flynn-Shon
    June 4, 2014 at 6:12 pm

    Warning – my comment is lengthy!

    I’m feeling like a bobblehead I nodded so much while reading this post! Back in 2005, at the height of the housing market boom, my husband and I purchased a house in a less than desirable area that we thought we could fix up and sell. Countless lines of credit, time and money spent on way more than we needed.

    Fast forward a few years and a total market collapse. We experienced a job loss (my husband worked in the mortgage industry and was out on his ass with about 20,000 other people in Long Island in the same week). We went into foreclosure and had no choice but to file for bankruptcy.

    Now, some people might find our story limiting, embarrassing and difficult to talk about, but not me. On the other side of that whole financial debacle came enormous clarity. We stopped using credit cards completely, reduced to sharing 1 vehicle and moved to a much smaller and less expensive apartment. I learned all the lessons you talk about here, even though I never wanted to learn them it was something that had to happen. (Chicken soup from scratch, lasagna & enchiladas are relatively inexpensive to make and will feed you for many days in a row!)

    6 years out of all that mess we figured out how to save, to be frugal and really look at everything we spent to ensure a secure future. We live in a modest home with 2 older (fully paid off) cars now and we completely rebuilt our credit by making smarter choices.

    Money is wonderful and as a full-time freelancer I love the flexibility my income brings our family but with every dime that enters our bank account now I consciously assess what we need (food, clothes, a place to live) against what we want (travel, cable TV, that extra bottle of wine) and fully budget what we can realistically spend to get/have any or none of those things.

    Forced perspective worked for me but it sounds like you’re making the smarter choices to avoid having to experience any of that stuff to begin with! Kudos to you, Tom 🙂 As always, a thought provoking post. Thanks!

    • Tom Ewer
      June 4, 2014 at 9:15 pm

      Thank you for sharing your story Jenn, I really appreciate it. It sounds like you have the perfect attitude towards what you went through, and will be better placed for the rest of your life because of it!

  9. Rowan
    June 7, 2014 at 1:44 am

    I’ve always had this habit because I want to minimise my participation in the economy because I don’t like what it’s doing to the environment. The trouble is, having to agonise over every decision to spend money is quite stressful. And I stopped earning an income 10 years ago figuring I could live on $12k/yr this way and that’s just got harder and harder, and I’ve become more and more marginalised. It’s hard to be so at odds with mainstream society.

    • Tom Ewer
      June 10, 2014 at 10:28 am

      Hi Rowan,

      I know what you mean about agonizing over every decision, but that’s really not what I’m recommending. It’s more about developing an instinct for what is worth your money and what isn’t. I’m hoping to produce some more resources along these lines soon!



  10. Fran Civile
    June 17, 2014 at 9:01 am

    Your post covers a very important subject, especially in the context of planning to leave a job to work independently.
    I shared it in a curation post on my blog ApprenticeMarketerGazette.com


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