One of the first financial advisers I worked with told me a story about a very rich man coming to him for retirement advice. He was getting into his late 60s and was looking to stop working. He spent around R20 Million a year which was covered by his salary. He wanted to know what he needed to do to put enough away to stop working and carry on with his lifestyle. Ideally in about five years. He hadn't started saving.
The financial adviser told him, 'The only thing I can do to help you with that is buy you a beer.' The truth is, this man was only rich by the measure of his lifestyle. He lived hand to mouth, even if the hand had always been big and the mouth always hungry.
Enough for a Beer
If someone is spending more than what they earn, they are arguably further from financial freedom than when they started work. The biggest obstacle becomes 'the lifestyle to which you are accustomed'. There are Yogis living simple lives with financial freedom. There are Chief Executive Officers earning multiple millions of dollars who can't afford to retire. The amount you have saved is only one side of the equation. Most people tend to adjust their lifestyles up towards extravagance as their salaries increase. It is worth trying to decouple those two things. Figure out what you need, then let any increases you get nibble away at the chains on your financial freedom rather than reinforcing them.
Managers of businesses know this in terms of running a good operation. There are fixed expenses and variable expenses. The variable ones can be cut down, but the fixed ones can bleed you dry. If you start a business that requires you to pay rent on the property each month, you have to make enough for that rent. If you have employees, you have to make enough to meet payroll.