Can You Afford Your Life?
by Eric Hamm on January 14, 2009
in Money, Personal Finance
Image courtesy of debt20
I’ve mentioned a few times that one of my New Years Resolutions is that of FRUGALITY. But the core of the desire to spend less is to finally be able to afford my life. For the longest time I’ve been either living just barely within my means or well outside these invisible boundaries. What this does is keep me stressed about and focused on money, and distracted from the more important things in life. Even my blogging has suffered as I struggle to focus on my posting while trying to shew away that annoying financial ‘fly’ that keeps buzzing around my head. All I’ve got to say is, “This has GOT to stop!”
How I got here.
So how exactly did I get to this place of being broke all the time? I mean, don’t I often times see thousands of dollars in my bank account? Well, this may be true, but it’s more a mirage than anything else. As a computer consultant I would go through times of flourishing and times of floundering. When things were going well I would naturally adjust myself to the extra cash and find myself making those purchases that had been put on the back burner. Then when things got slow again, panic set in as I started to yearn for the money I had foolishly spent.
There are two causes to this cyclic financial syndrome that I want to talk about today.
- Keeping a dynamic budget that is constantly in flux. When you have more money, you spend more money. When you’re broke, you stop spending. (You could say this is not having a budget at all.)
- Having a selective memory. When money is tight I can only think of the time that I no longer have. Because there’s nothing there to spend, there are no thoughts of spending. So the only thing left to gain is time. These are the moments when I realize the true value of this finite recourse. (I’ll go into this with greater depth, later.)
The ‘no budget’ budget.
Do any of you guys have a ‘no budget’ budget? You know, the kind where you spend your money based on your feelings? Well this is something I’ve used over the years and have found it to be a wonderful way to keep things tight and interesting. None of that boring financial freedom crap. Nope, we’re talking good old fashioned, keep up with the Jone’s kind of dynamic budget that never let’s you breathe. Aahh! That hits the spot…
OK, not really, right?! That absolutely SUCKS!!! I’m sick and tired of living a life of ‘feast or famine’. Liz will ask me something like, “Can we afford to go out to dinner tonight?” and my answer is always either a stressed out, “No.” or a relaxed, confident, “Absolutely!” It’s as if the good months become a sort of aphrodisiac, and lull me into a false confidence, only to be woken from my stupor when the well quickly runs dry. Then, when things are tight, I wonder what the heck happened to all of our money?!
Mixing up the value of time and money.
It always amazes me how quickly I forget how valuable time really is. It’s like solid gold compared to dirt when you put it’s value up to the ever changing dollar. Yet when my bank account gets its fill of that green monster I find that I’m taken by a kind of selective amnesia. Suddenly I forget about time’s finite properties and see money as this great prize to bestow all my attention. Images of all that I can purchase edge out those pictures of time with the family, enjoying the sunshine of an autumn afternoon. All the THINGS that I had been pushing aside so we could afford the basic necessities were suddenly pushing to the forefront of my every thought. Then I stay true to my ‘no budget’ budget by expanding our spending and guaranteeing more future stress over this finite object that’s deceived me once more. (Not really. I let myself be deceived. Maybe I even wanted to be.)
The REAL prize.
Time is the real prize we should all be after. All these movies that show money as the ultimate treasure should replace that false idea with time instead. Yet, in a sense they do. You’ve heard the phrase, “Time is money?” Well it should be, “Money is time.” Most of us are after money because we know it will allow us more time. It’s not the sports car, but the ability to work less and enjoy our families more that drives us to seek the ‘green’. But we have a tendency to sabotage this concept by spending more of our money on objects and less time with our family.
Every year during the holidays I am reminded how much more I value this precious time over money. Because it’s during this time that I often stress over the slowness of business, the expense of presents and the minute amount of time I spend with my family and friends. But fill up my bank account with a little extra, let me breathe a little and regain my confidence in paying the bills and I’m overtaken by this monetary amnesia once again.
How to stop the madness.
Let me start by stating that much of this post is purely pointed at me. If you happen to relate, wonderful. If not, then you’ll just be learning more about the guy behind this blog. And this ‘how to’ I’m about to share is more a plan that I intend to implement, not something I’ve proven as fact. So keep this in mind as I take a shot at regaining my financial freedom. I hope you can take away some helpful ideas, but know that you may be well ahead of me in this area and therefore see this as pure common sense.
I think the biggest adjustment to begin with is to stop the financial amnesia. To somehow maintain the mindset that time is the prize, not money or objects. This is SO EASY to remember when money is tight because we have no money to spend, but the same amount of time that we always have. Bring money back into the situation and spending once again becomes an option. See, the amount of time never changes. But let’s pretend that it did, for a moment.
Let’s say one month you had 24 hours every day and plenty of money in the bank. Everything felt fine. But then, the following month, you suddenly have 18 hours a day. Your money hasn’t changed, but your time has lessened. What are you going to begin thinking about? Your time, of course. See, whatever fluctuates gets your attention. The squeaky wheel gets the grease. Time has a hard time squeaking because it’s a finite recourse. If money were finite, it would lose much of it’s attention getting attributes. So we need to do this ourselves. Take away money’s ’squeakiness’ and give time it’s due attention.
So how do we do this? How do we make sure that time gets it’s rightful attention while removing the spotlight that seems to always pour itself onto our finances?
- BUDGET!!! This six letter word that many of us never truly understand. Having a budget is never having to ponder the question, “Can we afford to go out to dinner tonight?” A budget is a device that takes the decision of spending money away from the human and therefore maintains it’s consistency. A budget never gets overly confident or enticed by an advertisement. A budget always knows how much money is going in and how much will go out. If we don’t have a budget we will never have consistent piece of mind in regard to our finances.
- Make the most of your time. Just as important as a budget, treating time with the respect it deserves will help you never forget it’s true value. When we spend our spare time with family and friends and/or doing things that promote good health and deep enjoyment, we will always remember the great gift we have in our time. I find that it’s when I’m being lazy, not spending my time wisely that it’s place in my mind dwindles. Just think of that phrase, “spend my time”. We are spending our time, just like money, when we use it up. Of course, the difference between time and money is that with money there is a choice to spend. Time, not so much. Whether we like it or not, we are always spending our time. So having a kind of ‘time budget’ is crucial if we want to ensure our daily time investment is being spent wisely.
So what about making money?
I think one of the greatest frustrations we all have when trying to enjoy our time is the fact that we still NEED to make money. The trap we tend to fall for, though, is focusing ALL our attention on this task. There may be a few of us who truly do need their full attention on their money making attempts, but for the rest of us, we need to adjust our spending to our money making capabilities and not the other way around. I’m not saying we should stop trying to further our income potential, just that we tend to do things backwards in this area.
I’ve always been the type to spend first and ask questions later. I always make sure that the money is there, I’m just not usually thinking about whether it needs to be there down the road. I have a tendency to try and make enough money to meet the requirements of my spending habits, when it should always be the other way around. We can only make the money we can make. We are limited by our experience and current situation. (And don’t think for a second I am advocating we can’t make MORE money and expand our careers, just not at this very second.) So it is absolutely crucial that we adjust our spending according to our income. Once again, not rocket science, but a commonly missed concept, none the less.
So what are we making right now? $1,000/month? $5,000/months? $10,000/month? Whatever it is, does it FULLY cover (and then some) your current spending habits and financial needs? And not just for this month, but for every month for years down the road? Are you taking into account the unforeseen expenses and emergencies?
If your income is not fully covering your expenses and/or you are in dept in such a way that you’re not paying it off quickly, you need to make some serious adjustments and do it RIGHT NOW! I know this is harder than it sounds because of some non-flexible expenses like our mortgage. But this is where we’ve got to get creative. The degree of change is up to you and no one is holding you back. We can either slowly sink to the bottom or go through the growing pains of financial freedom, right now.
My up-coming journey.
Beginning today I am going to be making some serious changes that will cause some initial discomfort, but allow for future freedom. Please join me on this journey if you are one who struggles like me. It should be a time of growth, excitement and pain. But I’m so sick of living my life, ‘paycheck to paycheck’ that I’m ready to jump right in. I would love for any insight from those who are further along on this road. And for any who lag behind, I offer a helping hand as well. This won’t become an overshadowing topic on “Motivate Thyself”, but will be a new theme of sorts. So I look forward to the road ahead and hope to share some common ground with many of you. Financial freedom has eluded me too many times and I’m done foolishly chasing my tail.
True that, Eric! I totally feel you on all the above. I was rather frivolous until moving into my current house, at which point frugality was an absolute necessity. I’ve learned to live on a tight budget, but now even that is not enough. Using our minutes wisely to shift our direction is paramount. Time is our most precious moment. Our bank account will live in flux for ever, but our days will never gain a twenty-fifth hour.
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Eric, I know exactly how you feel! I have made huge improvements in my own life in the past 6 months or so with both my finances and my time. Learning to live within your means is a difficult lesson. Now that I’ve learned how, I’m finally getting to the point where saving for the future and spending time on the things I love has become a reality. I wish you the best of luck with your commitment!
I have my bills over my head, and some debt from a failed business venture. But the most important thing I have learned from this is what you mention…’time is our most precious thing.’
I use that now in my biz, b/c I used to not track my time. Once I started to, I realized exactly how long certain projects take, and how much I was really getting paid hourly. What a shocker!
I use Time Post for the Mac, but I would suggest definitely tracking ALL the time you spend on each project for any freelancers out there like me. You may be surprised on just how little you earn per hour. I was!
As usual, great insight Eric.
Peter Normandia’s last blog post..Five Tips to Battle Against Complacency
@Sean: “Using our minutes wisely to shift our direction is paramount.” I love this line. Definitely a direction I’m pointing my energy.
@Frances: Thanks, Frances! Not being able to look forward with savings is one of the most frustrating parts about it. I’m looking forward to changing this.
@Peter: I’ll definitely be tracking my time more. I’m sure it’s an eye opener. Thanks for the comment and I look forward to both of us excelling in this area as time goes on. Eric
Wow. There you go again. Getting all in my head.
You know my past and that definitely didn’t include managing money in any way what so over. Paycheck to paycheck was the norm and pretty much always has been. I guess, it’s my lack of self-discipline that has gotten me into all the mess that I have with finances and with the other problems I’ve had.
Now, after sooooo many years, it’s become a habit, this…lack of money/time control. A habit that is hard to break, and I don’t even know where to start, other than the budget, and YUCK. Just the thought.
I’m in. I’ll join you. It’s time. “I’m done foolishly chasing my tail.”
So, where do we start
Speaking of frugality. The specific frugality and money saving genre is on a rapid rise. 12 months ago there were only a handful. Just a random note.
@Scott: Awesome Scott! I’ll be posting about this on and off for awhile now, so keep your eyes out and we’ll start working on the first steps soon.
@Womwon: Thanks for mentioning that. There’s no doubt that this economy is creating a strong desire to learn the skill of frugality. This is something we should all be doing anyway, it’s just that these tight times make that point much more assertively. Eric
I enjoyed the raw honesty of this post. Good luck, Eric. You are now on your way to true financial freedom.
@Vered: Thanks, Vered. I’m glad you enjoyed it. Eric
Eric,
I’m 54 and I believe my four daughters are around your age.
We never went out to a nice restaurant (not fast food) until they were in high school and that was only a couple of times a year.
So we’d go to Wendy’s, Subway, places that were healthy and cheap.
When we went out as a couple we would go at happy hour and we knew every restaurant in town, what was on the happy hour menu etc. We would order soda and that meant free refills.
Today going out to eat is expensive and drains your budget. Keep a record of how much you spend on food alone. It may surprise you.
My husband and I also each had more than one job. We turned our hobbies into work so it really didn’t feel like work. We did this because we wanted extra money.
Just an example of creativity: I know a family of six that lists all their talents (children and adults) on a flyer and posts them in busy places in their neighborhood. One of the jobs they get called on the most is helping people pack, clean and have garage sales when they move.
A third idea is to buy mostly second hand clothes. Our kids grew up in them. When they were old enough to get jobs (ice cream parlor and grocery store) they began to buy their own.
Another thing is too often money is spent on updating tech gadgets and stuff , ipods, phones, computers just because a new version is out not because it’s needed.
We’ve been together 37 years and in all of that time we’ve only owned 2 new cars. New cars are a drain on a budget and leasing cars are a drain as well. We buy used cars, take care of them and drive them until they die. The car I have currently is 10 years old. I paid it off immediately and haven’t had a car payment in years! My husband has a Prius, he paid cash.
Anyway I know I’m aging myself but hey you wanted advice. We sent our four girls to college, have a cottage in MI and live in AZ.
The amazing thing that happened with us is we have benefits from our duaghters jobs. Two are in shoe sales. I’m a runner and I have all the shoes I need and more free.
Another daughter works for South West airlines and we now fly anywhere SW flies free.
Amazing eh? I hope this helps. Take what you need and leave the rest!
Anyway I consider you a friend and decided to share this with you and the community!
Tess Marshall’s last blog post..12 Bold Ideas For a Happy Marriage
Hey Eric,
You had written this article in a very engaging way and I believe that you can succeed in your achieving financial freedom. Good luck!
Cheers
Vincent
Personal Development Blogger
Vincent’s last blog post..How To Achieve Success In Everything
Good for you! I was rather pushed in front of the ‘taking over your finances’ train just over a year ago. I had just graduated college, had about $5000 in CC debt and was attempting to pay for a wedding while my fiance was finishing school (my parents wouldn’t help and his parents couldn’t afford to). I finally realized I was done trying to live up to this ideal I thought I had to be by spending money I didn’t have. I buckled down, saved up and gave up A LOT. I worried at first that I would resent all that I gave, but I don’t. Controlling my finances instead of them controlling me has been a great ride!!
A couple things that have helped me and continue to keep me on the frugality train are the following:
– STOP BUYING MAGAZINES! I used to buy fashion magazines and I would always get the worst case of the ‘wants’ afterwards. 50% of those magazines are ads designed to make you feel like your life isn’t complete without the newest gadget/shoe style/beauty product/home thingy. Avoid advertising as much as possible!! Cancel catalogs (they’re a waste of paper anyway), limit your TV time (or mute the commercials), stay away from the mall. Doing these things will also free up precious time.
– Find good personal finance blogs. Having constant reminders/tips and knowing other people are going through the same thing is such an encouragement and can help keep you from making common mistakes. One of my favorites is Get Rich Slowly, it’s awesome!
– Give yourself an allowance! If you don’t let yourself have a little bit of fudge money to get little things, you’re going to have a much bigger temptation to buy those big things when you have an inflow of money. This lets you enjoy the little things in a life (occasional Starbucks/Jamba Juice anyone?) without breaking the budget. I have $25 a week and it lets me splurge on a new pair of shoes/lunch out or whatever.
We were able to pay for our beautiful wedding without borrowing anything and am within sight of eliminating all of my CC debt, next up are the student loans! This has been great for my personal life as well as my relationship with my husband.
Good luck on the ride and we’re cheering you on!
V.
Sounds like you’re progression is snowballing! How exciting.
The magazines & advertising also give the message that your body isn’t good enough. Fashion are the worst!
Also any mag you want to read you can get at the library free.
The only thing I would add is to shift your perception on this one sentence. (maybe it’s the way I’m interpreting it.)
Other people are going throught the same thing-I interpret this to mean it helps that others have to cut down as well, so poor me I’m not alone.
Also what helps is to view cutting back as a postive change, I’m saving money which will positively effect the rest of my life.
“Wow look how we are all being smart about our money. Isn’t this great and exciting.” It helps shift from poor me I can’t have that.
I agree with the pay yourself an allowance as well. What a wonderful way you have begun your life together.
Tess Marshall’s last blog post..12 Bold Ideas For a Happy Marriage
@Tess: Wow Tess! Thanks for all the insight! Great stuff! Buying the latest and greatest tech gadget gets me every time.
@Vincent: Thanks for the encouragement, Vincent!
@V. Higgins: Wow! More awesome tips. Thanks!
“Controlling my finances instead of them controlling me has been a great ride!!”
I love this line! And giving yourself an allowance is certainly key. I appreciate you taking the time to share. Eric
Some of the best advice I ever got:
Never love something or someone that can’t love you back.
But even knowing that I love my purses and shoes…. all that stuff I think I have to have. And then one day you’re working 70 hours a week and dropping your baby off at day care and with grandmothers, wondering why you have to work so much. Suddenly I look at all my stuff as an albatross, a burden of my own making. It’s a vicious cycle, though, because when my bank acocunt goes back up, do I put it in savings? No, I go buy more stuff.
Glad I’m not the only one going through this.
Kay,
Shift to “I’m glad I have this opportunity to learn. It’s so exciting to take responsibility for my finances.”
This single thing will empower you more than you realize!
Tess Marshall’s last blog post..12 Bold Ideas For a Happy Marriage
@Kay: I’m SO with you on this one! It’s a vicious cycle and one I’m ready to rid myself of. Stay tuned as we explore more ways to break free from this unnecessary burden.
@Tess: Exactly! Turn a phrase of frustration into a declaration of positive change. Eric
Eric,
I too am just beginning this journey. I am looking forward to seeing your progress!
@Greg: That’s awesome! We’ll knock this out together!
Eric
Hi! Thanks so much for this site! Makes me feel better to know that someone else is going through the process of starting over financially and making a fresh start. I’m on a similar journey. Looking forward to following your progress!
MissReaux’s last blog post..Starting Over Financially
@MissReaux: No, you’re not alone. I’m glad you were able to relate and I hope to bring future content to help us both in the is area. Eric