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My thoughts on this have changed as I've dug into investing, wealth management, and income properties. 10-15 years ago when I was going through my divorce and paying lawyers with cash advances on credit cards I was budgeted to the penny, summers were good because I could live off rice and whatever my friends gardens had too much of, winters saw me at every church food event in the area and you bet your ass I wanted the leftovers.
Then I got a small raise, 3%. It wasn't much but it was enough, I started putting $25 a paycheck into a savings account for 1. emergencies or 2. Life-changing investments. This is where I started looking for opportunities. Cell plan was $85/mo with Sprint, I switched to Ting and it went to $30, now I could do $5 per paycheck into a savings for my kid, upped my paycheck savings from $25-$35 and the rest of the savings went into an allowance account that I could piss away on whatever I wanted (for a while it just went to pay down credit cards).
I met a guy who biked everywhere, even in the winter, in Wisconsin. I did the math on how much it cost me in gas to drive to work every day, it was $3, or $6 if I drove home for my lunch break. Some days I needed the car because I had my kid, but the other days I didn't, so my first spend from the 'emergency' money was on a bike, a high-quality daily rider from Europe, and I'd put $5 into the emergency account every time I rode it to work. I also got a bit healthier, and in a few months the bike had 'paid' for itself and my emergency fund was growing. My ultimate goal was to have $500 set aside for everything I was responsible for that eats, so that was me, my kid, my car and my apartment (it ate rent and utility bills).
I'd look for every opportunity to optimize, I tracked what I paid for non-perishables, and would tap the emergency fund when I saw a dip in price so I could buy as much as I could store of things like Toilet Paper, trash bags, toothbrushes, deodorant, razor blades. I looked at 50% off coupons like returns on investments if it was for something I'd buy anyways. My favorite were the $3 off any item that they used to do for deodorant and shampoo, because the store I went to had travel sizes for $1 and I could use the other $2 towards the rest of my grocery order. I think it took me about 4 months to have a 2-year or more supply of non-perishables, plus 3 months worth of canned food. This 'security' gave me the guts to request a raise at work, which was granted, 20%.
The raise negotiation was a little tense, I got a little bit fearful that my higher pay would make me an easy target if there was a layoff, so I took the entire increase and put it into that savings until I had 6 months' of living expenses at the standard I was living. Once I hit that then I started paying off my credit cards aggressively, lowest balance card to highest balance card, adding the snowball to the minimum payments I was making.
It was around this time that I started dating again, and I met my now wife, when she moved in with me she started paying half the rent, and we alternated who bought groceries for the week. We alternated monthly bills as well. I threw all that savings to the credit cards too, and she was better at the coupons than I was, we started getting fuel points then with our grocery purchases so when one of us needed gas we'd both go to the gas station and use the points to fill both vehicles.
We wound up applying for a mortgage and buying a house together, I chose a minimal downpayment to protect the savings we'd accumulated, and our 30-year mortgage was only $200/mo more than rent. What a joy that I was able to call $200 (only) when 2 years prior it would've been life-altering money. With the house we didn't go nuts with decorating or any of the things couples usually do when they combine spaces, I think we bought a kitchen table with 4 chairs for $160 from Walmart (we still use it, it's our table today). I tapped into the emergency fund to buy that woman a ring and pay off my last credit card in July of that year.
A year after that we got married, and with that came a substantial windfall from the wedding gifts, mostly cash, we rented a boat and got married on a river with my in-laws hosting the reception at their place, the whole thing paid for itself and was a blast. On my kid's 5th birthday I started putting money into the stock market to get a better return as my emergency fund wasn't paying much interest, and I also maxed out my 401k contributions that year as I was living nearly as cheaply as when I could barely afford food.
We trucked along like that for a while, dealing with the unexpected homeowner costs of storm damage, chimney leaks, replacing windows on our old house, and replacing furnace and water heater. We got ripped off by a contractor we hired to paint the house so we got to pay for that twice! None of it was a real problem because of the emergency fund we'd built. Then Covid hit.
Suddenly we weren't going anywhere but work, we'd actually planned a vacation that was put on hold, and we got pregnant after several miscarriages. The hospital was awesome during covid because we didn't have visitors every 2 minutes, and it was a great time of bonding for my wife and I with our new daughter. We came home and I was able to take 12 weeks off on intermittent leave for paternity leave after my wife's 12 weeks was up (this let me work 3 days a week for basically the rest of the year). I used the time to dig into our finances as I was very concerned about a disruption like covid causing us to lose jobs that we were still very reliant upon, and I looked into rental real-estate as we're in a college town as an independent income source.
My wife wanted a new house before she'd be ok with me getting into rentals so we bought a new house that summer, and when we sold our old house I had the seed money for rentals. Wound up finding a licensed electrician at a real estate meet-up and we formed a company. For a while we were just putting money into the business bank account to build up a war chest, and in 2022 wound up purchasing a duplex and a triplex.
In 2023 we were able to increase rents and buy a single family home from a lady going through a divorce, allowing her to stay in the house with her kids but pay rent to us instead of having to move her family and lose the house.
In 2024 the lady bought her house back from us at a greater price than we'd paid for it, and we rolled that profit into another duplex, my wife and I also had our second kid around this time and I'd gotten a better job.
So now I look back on life-changing money being that tiny raise that bought me breathing room, and focusing on long-term returns on my money being the best way to spend it.
What would I do if I won the lottery now? I'd pay off all the properties, I'd invest in an S&P 500 ETF, and I'd get to go to every school function, field trip, concert etc. I would buy more rental properties and hire someone else to manage them for me at an excellent salary, and as far as family would know, we quit our jobs to manage rentals.
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