I know you’re probably reading the title of this post and thinking that I’ve lost my mind, but hear me out: for MOST people (not all) your credit card debt is largely due to too much money going OUT rather than not enough coming IN.
Don’t get me wrong, a raise would be awesome…but consider this: Say you have a job making $40,000 a year, and you buy a $95,000 house and a $15,000 car. If you won the lotto tomorrow, and suddenly you had $200 Million dollars in the bank, you’re not going to drive around in your Geo Metro anymore….you’re going to upgrade. The point here is that for most people, the amount you spend is directly correlated to the amount you make. If you bring in more money, your commercially-generated instinct is to spend more too.
If you’re making at least $30,000 a year I have a harsh piece of reality for you: You’re not making too little, you’re spending too much.
Of course there are exceptions as I said above. If you’re a single mom of four kids and their father doesn’t pay child support, then yes, you probably need to make more than $30k a year to support them. This is a general statement to be taken as an example. You can live on a lot less than you think you can.
I know that’s not what you want to hear, and I am certainly not pointing the finger at you, or trying to berate you in any way because I promise you–I have done the same exact things or worse! What I am trying to do is to help bring you to that very realization, so that you can correct it.
A friend of mine recently posted this MintLife article, which discusses this very topic, and it couldn’t have come at a better time, because I had been rolling around the idea for this post in my head for a couple months now, and I wanted to make these exact points. The problem I was having was that I knew it would make people mad. I knew that people would be angry. How could I say such things?! “MY situation is different. You don’t know me!” While you may be right, I bet there are things you buy that you shouldn’t. I bet there are ways you can get what you need for cheaper. My goal here is not to make you uncomfortable, or angry, or upset. My goal is to HELP.
Let me give you a perfect example. When I got engaged, we knew we were going to have to pay for our own wedding. When we were looking at our budget, I started crying. Bawling. Because there was simply no money for a wedding in our budget. We couldn’t even afford a flight to Vegas. We might as well just skip the whole thing. There was not one extra dollar to be found.
Or was there?
I started looking at my finances…I mean REALLY looking at where each dollar was spent. I pulled out my bank statement and realized there were a LOT of little charges on there. Most of those little charges? Dining out. $5 and $10 here and there for lunches couldn’t possibly pay for a wedding right? WRONG. I soon realized that those little charges plus a Chinese takeout dinner each week were adding up to almost $400 a month. I nearly passed out when I realized what we were blowing every day and not even realizing it. It doesn’t seem like a lot, but I assure you, those incidental costs WILL blow your budget. Small leaks sink great ships and all that. Seriously.
The point is this: No matter what you bring in, there are little expenses you aren’t aware of that are eating away at your savings. Take a look at exactly where every dollar goes and you might be surprised. Chances are you are overpaying somewhere. Whether it’s for your $4.00-a-day Starbucks habit, or your lack of coupon use at the grocery store, or paying extra for convenience foods, not meal planning, eating lunches out instead of brown bagging it…the list is endless. Bottom line: Reign in your spending for true financial freedom.
Don’t believe me? Check out the recent MintLife article on debt. You can pay off your debt, but if you don’t adjust the root cause, it will simply creep back again.
The sooner you change your thinking, the sooner you can start down the path to financial freedom!