(Guest post by Hank Coleman)
I hate budgeting. There, I said it. That can’t be a popular stance to take on Budgets Are Sexy. Budgets are not sexy. They suck actually. I’m here to say what many of J. Money’s readers probably feel but don’t want to say. We read this blog (me included) because one day we don’t want to budget our money anymore. Our dream and goal is to have more money coming in than we spend every month… so much more that we don’t even have to have a budget. That’s the goal: to make budgeting obsolete.
But, I’m here to tell you that we are doing it all wrong. You think about conquering your budget from the wrong side of the fence. You can’t conquer your budget by pinching pennies. You have to do it by crushing your income.
Cutting Out Cable Channels Sucks
I love having two hundred high definition channels from my cable television company. And, the way I see it is that they are actually saving me money in the long run. Many personal finance blogs throw out the easy fix of cutting back on your cable television programming as a way to save money from your tight budget, and that is absolutely true. Dropping from 200 channels paying $150 per month down to the bare bones basic package could save your hundreds of dollars per year.
But, what about the sacrifices to the quality of life that you are making? Is it worth it? Will you fill the void of less television channels with something else, maybe something even more expensive? I found out when I dropped my cable package a few months ago that I got incredible bored sitting at home, reading books, and simply watching old DVDs. I was saving a fortune initially, but then I started to go out to the movie theater to see more movies or buying new releases on DVD. Taking my two children to the movies with me quickly racked up to $40 a trip to the local movie theater if you include tickets, popcorn, and drinks. And, the movie theater wasn’t the only suck on my wallet.
Now with all of our free time thanks to the elimination of our cable television, my family and I had more time on our hands to explore our city, visit the aquarium, and see a baseball game. You do not have to be a rocket scientist to realize that these activities quickly started costing me more money than I was actually saving by ditching my cable channels.
Look At The Other Side Of The Fence
Cutting unneeded expenses out of your monthly budget will only get you so far towards financial success and the freedom from living paycheck to paycheck that over 70% of Americans dream of. Most people forget that there are two sides to the cash flow equation. You can either cut expenses out of your budget to make ends meet (which Jay just so happened to blog about – damn him), or you can increase your income. We work hard at our day jobs, and telling people to get another job is rarely popular advice. But, adding income is an easy way to make up the ever widening gap between what you spend and what you earn, and it can help you find that elusive financial peace of mind that so many people are looking for. I’m not saying that you have to get a complete second career, and I’m not suggesting that you have to work another 40 hours per week. I think that J Money has hit the nail on the head with his Side Hustle Series. Working odd jobs or part-time jobs can have a huge impact on your budget and may be able to help you escape from having to cut your expenses to the bone.
How Many Dudes Bought The McMansion By Clipping Coupons?
Robert Pagliarini said something in his book, “The Other 8 Hours“, which really struck a nerve with me when I was reading it. There is always at least one nice neighborhood in every town with McMansions and manicured lawns. I’m sure you know the one street in the city you live. How did these people amass their wealth? Unfortunately, it wasn’t from clipping coupons or cutting things like 100 cable channels off of their television cable bill. These folks created something. They created a blog, wrote a book, invented something, started a business, or created some other profitable venture? Eighty percent of all millionaires in America are the first one in their families to reach that mark and not the trust fund heiresses that we all think of first in our minds. The millionaires around us are creators. They are income producers.
You will never become rich by simply cutting expenses from your budget. Eventually there will be a time when you cannot cut anymore. Something will have to give. You hold the key to making your budget obsolete. By looking at the other side of the fence, the income side of your budget instead of the expenses, you can gain the financial independence and peace of mind that you have always wanted. It is your income that you should be focusing on and not solely on cutting expenses.
Hank Coleman blogs at Money Q&A where he writes about personal finance, investing, and retirement and also tackles any personal finance question you throw at him. Be sure to sign up for his RSS feed to ensure that you don’t miss a single article.
EDITOR’S NOTE: I like this article cuz it reminds us there are two sides to the equation here. Sometimes I fall into the “income generating” one (actually, MOST times I fall into that one), but then there are others like right NOW where I’m alllll about getting rid of my (major) expenses. It’s a balancing act for sure, but I agree that both sides are pretty important for financial freedom.
(Photo by LosAnheles)
PS: Some of my favorite tools:
|Personal Capital (FREE) -- If you’re looking for a robust financial tracker, Personal Capital is the way to go! They’re like Mint, but on steroids and have much better tools for investment and net worth tracking. // Full review|
|Digit (FREE) -- A super easy (and automated) way to save. Every day Digit analyzes your income and expenses and will push money aside for you any time it sees extra sitting there. I've saved over $4,000 myself using them so far! // Full review|
|Acorns -- Having trouble finding money to invest? Check out Acorns – they round up all your transactions to the nearest $1.00 and drops the difference into an investment portfolio for you. Easy way to start investing! // Full review|