by Damon Carr, For New Pittsburgh Courier
What do men in skinny jeans and a tight budget have in common? NO WIGGLE ROOM! It’s hard to create a legacy when your tools of procreation are restricted. That’s right, your income is your most powerful wealth-building tool. When there’s no margin between your income and your expenses, you make it hard on yourself to get ahead and create an abundant life!
I’m claustrophobic. I wasn’t always this way. Several years ago, I was on a business trip. The hotel where I was staying had a gym. I decided to take the elevator to the gym. Then it happened. The elevator got stuck. The alarm was sounding off. I was pushing button after button trying to either get an attendant or get this elevator to move. Nothing! I started breathing heavy and sweating profusely. I ended up putting my hand in the small cracks of the door. I was able to pry the elevator open. As I opened the door, I noticed that it wasn’t level. I literally had to pull myself up and climb out of the elevator. It probably lasted all of 5 minutes but it felt like 5 hours. Needless to say, I didn’t work out that day. Nor did I use the elevator the remainder of the trip.
To this day I’m still claustrophobic. I live in Pittsburgh, where there are several tunnels. One of my biggest fears is being in the midst of a traffic jam and getting stuck inside the tunnel. It happens more often than I’d like to admit. Regardless of the weather, if I get stuck inside the tunnel, I have to turn on the AC, roll down the window, and talk to myself until I’m close enough to the exit where I can see light at the end of the tunnel. I know it sounds irrational. Frankly, it’s somewhat embarrassing. I don’t like being confined. I cannot go to jail. There better be space in my casket after I die or I’m going to die a second death. (Joking)
Being constricted and confined is never fun! Same holds true for your money. Many of us hate payday because it’s a reminder of how close to the edge we are living. Payday is actually “handover day.” You get paid and you hand your hard-earned money over to bills, expenses and debts. After the bills are paid you think to yourself, “I work too hard to be this broke.” You’re frustrated that you bust your butt for two weeks, yet after you pay bills, you have nothing left over to splurge on yourself. There’s no fun money. There’s no going out to eat money. There’s no date money. There’s barely enough gas money remaining to get you to and from work for the next two weeks. The idea of saving money for your future is wishful thinking when your present is costing you every single dollar you got.
You internalize that “it is what it is!” Most of your close friends and family members are enduring the same struggle so you believe it’s the American Way. You give yourself peace of mind by focusing on the good things. At least I have a roof over my head, clothes on my back, food to eat and decent transportation. Deep down inside you hope for a brighter day. You think the answer is more money. More money is always a good thing. But if more money was the answer, why are people of all income levels struggling to get by? A person’s bills and expenses parallel their income. The more “income” the more “out-go.” In other words, more money, more problems!
There is another way! But you have to become claustrophobic about your money. You cannot be OK with your expenses being wrapped around your money like skinny jeans. You don’t want to be confined in an elevator that’s not working. You want to put yourself in a position where you can see light at the end of the tunnel. You want to see your debt balances going down and your saving and investment balances going up. How do you do that? Give yourself some wiggle room!!
Free yourself First: Free up a minimum 10 percent of your household income. Let’s assume that your household income is $60,000 per year or $5,000 per month. You need to free up at a minimum of $500 per month. This $500 cushion will be used to first establish a minor emergency fund of $1,000 to $3,000 depending on income stability. Once you establish your minor emergency fund it will be used to accelerate the process of you paying off all your debt except for your mortgage. We’ll detail how to pay off debt in future articles.
How do you create wiggle room? One of three ways: Increase income, reduce expenses, and do a better job of managing your money. The key is to do all three.
Increase income: If you want to spend, save, and, invest more money and not change your lifestyle, you need to earn more. Ideas to increase income: Promotion on current job, overtime on current job, second job, side hustle, side business. Temporarily suspend retirement savings (no longer than 2 years). If you receive a large tax refund check ($2,500 or more), modify the W4 form to receive more money in your paycheck. Sell some things that you no longer use and/or you can’t realistically afford.
Reduce expenses: A penny saved is a penny earned. It requires less blood, sweat, and tears to reduce expenses than it does to create income. Ideas to reduce expenses: Do it yourself, do without, stop dining out, cancel subscriptions you don’t use, curtail spending on your vices. You know what they are.
Manage your money: Know what you owe! If you can’t measure it, you can’t manage it. Create a budget. Be proactive about your money and tell it what to do instead of wondering where it went. Account for every penny to every $100 spent. Doing this will help you isolate wasteful spending, give your money purpose and allow you to prioritize your money, life, and time.
If there’s no wiggle room between your income and expenses, your goals, your dreams, and your life are going to suffocate. Give yourself some WIGGLE ROOM! The more wiggle room you have, the faster you can beat debt, put your savings on steroids and have a life.
(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website @ www.damonmoneycoach.com)
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