Good habits are, often over a period of time, the difference between a roaring success and a crashing failure. Good habits make things possible by setting you in the right direction step by step instead of a whimsical leap of faith. But, there are often habits that once practised and reviewed, DO help you take that leap of faith! One such habit helped me quit my day job, eventually freeing up my time for working on the kind of projects that I had always wanted to work on and do things that I had always wanted to do without worrying about leaves. In this post, I help you discover what that habit is and how much it can liberate you to follow your long put-off dreams.
Sowing the seeds of a habit
Newly married and back to Mumbai after our honeymoon, Priya (my wife) and I shifted to the suburb of Thane, where she landed a transfer of location in her job. That immediately added a 5-figure per month rent to our expenses every month. That was not a problem since both of us were earning pretty well. But we still had to make sure that we didn’t go awry with our spending. So we started a diligent habit of recording our expenses and income every single day.
Tracking my expenses was something I had intended to follow as a habit even during my bachelor days, but I had not been regular with it. I used an app named Home Budget to record things. But I often forgot and a backlog piled up for days until I got bored and stopped the habit. But now it was time to get more serious about it, since we were building a corpus for our many dreams together.
Being a cost accountant and hands-on with finance, Priya made it really simple for us. We have an Excel sheet with dates as columns and categories of income and expenses as rows. At a fixed time during the day (read my post about how to get things done on a daily basis by using a calendar), we sit down to note down all our expenses and income during the day. Of course, expenses happen everyday, but income is sparse such as days of salary, gifts, dividends, etc, but fortunately they are much bigger numbers than the expenses 🙂
How patterns unfurled
Over a period of time, as the records grew, we started noticing interesting patterns which gave us many revelations. For one, we noticed a lot of days where we spent nothing! Priya goes to work by bicycle and I used to get a monthly season ticket for my commute to office. Both took home-cooked food to office and found very little or nothing to spends on. Our expenses per day were generally restricted to triple digits with occasional spikes into 4 figures. We used a lot of discounts from sources like PayTM, PayUMoney, Payback points and several others to cut our expenses.
However the above observations were ‘nice-to-know’s. One more big revelation completely changed our lives. But we need a bit of a story first. Priya has always been dreaming of her own business and that enthusiasm rubbed off onto me and soon I was doing projects as side gigs, trying to spin off my own practice. However, I was terrible at managing my full-time job and my practice and ended up failing to deliver 3 of my 4 side gig projects and unfortunately, it was my full-time job’s heavy demands on my energy and time that was cutting off my side gig. I had to make a decision and we decided to review our cash flow.
That is where we saw how rosily placed we were and what a good position I was in to break loose from my full time job. We noticed that we were just spending under 25% of our total monthly income and saving the rest. This meant that one of us could take a risk and try an independent practice, while the other stuck to full-time job for stability. Since I was already getting clients from various references and had potential, I took the plunge. It was to be an experiment for 6 months. Even if I were to not earn a penny for that time, Priya’s steady salary could keep us pretty comfortable. In our eyes, success for me was if I could earn enough to meet the expenses of our typical lifestyle and save some for every month.
Luckily for me, my hard work paid off and I have built a steady practice. It was a leap of faith which paid off really well. I was able to control the projects that I took in, control how many hours and days I could use for consulting and be a boss of my own time and resources. I could start this wonderful blog and another technical one named Tech 101. I could travel more without worrying about whether leaves would be approved or whether I would be suddenly called to work during weekends. I became much more relaxed and healthier than before. Priya has been so lovingly supportive with my independent practice, although it was initially her dream to become an entrepreneur. She is well on her way to that dream.
What about the money? Well, I am happy to report that I have been earning quite steadily and sometimes even quite handsomely. In fact, my last month’s income was more than any of my past monthly salaries from my day jobs, as things fell into place beautifully 🙂
But all this was possible because of that one diligent habit of noting down our cash flow every day and building up enough records to notice marked patterns that gave us the confidence. I am sure that we are going to notice more such patterns and take confident decisions in the future. By knowing and recognising our financial behaviour, we will make sure to that money and cash flow is not the constraint that is stopping us from daring to do what we dream.
Please note that we do not need a truckload of money to enjoy most of the things in life. As mentioned, all you need is enough money to meet all the expenses of your typical monthly lifestyle and set aside enough for savings per month. Earning 25% over your monthly lifestyle cost is a good guideline to start with.
Have you ever sat down to look at your cash flow tap? What have you realised from it? Having you been leaking too much cash on a certain habit / addiction and can it be fixed? Do you earn and save much more than what you imagined and have been restricting yourself from enjoying life much more? I invite you to share your experience in your comments.