Financial Fluency Episode #52 Income Is Only Half The Story

Today I wanted to talk about the idea that revenue can solve all problems or that income solves all problems. I’ve heard people say this especially in terms of businesses, that when there’s a problem.

Generate more revenue and it can take care of everything else.

You can listen in below

In our own personal financial lives, I tend to think that the income really is only half the story and I wanted to talk about this particularly because I’ve talked to a few women lately who have had significant debt and who have had issues with their finances but they’re counting on an event happening, a launch, or something where there’s either a large amount of income in a short period of time or in a lump sum, that’s going to wipe all the debt out and take care of everything. And because of their expectation of this they don’t want to put a plan in place in the meantime to start working on the debt and to reduce.

So, I wanted to do this episode to talk about the idea that while yes, increasing your income can help in a lot of ways, I have talked to a number of high-earning women who still have a lot of these same problems, because something that happens both in companies and in our own lives is often as you increase your income you also increase your expenses and depending what line of work you are in, those expenses can get really high.

An Example

I’m going to give an example. This is a made-up person, but let’s say you are a lawyer in New York City working in a law firm and one of the things you like to do is entertain people at your own home with dinner parties. Which means you have an apartment in Manhattan that’s very nice. You have to keep up appearances to a certain level. You probably have a lot of student debt from going through law school to start with and then in making partner you have to travel, you have to wear certain clothes, you have to do all these kinds of things that all cost a lot of money. So it’s very possible for a lawyer living in Manhattan to have a great deal of debt. To have a high-income, yes, but also have very high expenses and be just as strapped and just as pay check to pay check as a much lower earner. So, the idea that just income will solve all the problems, I’d like to examine that and take a look.

Will Increasing Income Solve All Your Problems?

I think that building up the habits that are going to continue to build your savings, pay down your debt, all along as you increase your income can really make a difference.

And, paying attention to the details in the moment. I don’t want people to have to pay attention to all the details of all their financial life all the time because I think that creates decision fatigue that can overwhelm. Which is why I really love the process of automating the simplest things like your regularly recurring bills.

Automating so that your mortgage or rent gets paid every month, you know all the things that have to happen every month. You can automate those. It doesn’t take as much of your brain power or your will-power or your decision-making power. It’s less of that executive cognitive function that gets exhausted and you can put more of that towards the real decision that you need to make.

That’s why I’m such a fan of automation. Earlier today I spoke with the members of my Mastering Money Matters Group about automation and there were a number of people who had a lot of resistance to it. They had a lot of reasons why it wouldn’t work for them and I do understand that resistance. When we talked through it and really go down to the underlying issues, a lot of it is control; wanting to feel like you have control of things and that you are taking action. So giving up some of that for the basic things that have to happen every month, it’s regularly occurring you know, you’re not, not going to pay your rent right? So even if you have a irregular income the rent is going to get paid one way or another, right? So that’s why I feel like if you automate that, yes you still have to check on it, you can monitor the system, but it’s not a decision that you are making. It’s not an action that you are taking. You can save that part of your energy of making decisions and taking actions for things that will increase your revenue.

Reducing Bills, Automation and Eating Your Raises!

Also, with reducing your bills, calling and negotiating. You don’t have to do that all the time, you don’t have to do it every month, you don’t have to do it every day. If you do it once a year, or maybe twice a year it could get those savings locked in and then they just keep recurring over and over.

That’s why I love the idea of automating the simplest part of your finances so that it takes it off your plate and you don’t have to actively think about it anymore. And that is the whole reason for setting up systems. And we do this through a lot of different ways.

You know we set notifications on our phones, we set alerts for appointments, we outsource different tasks in different ways and that’s what I like about doing this with your finances. So really the whole point of this episode is just the idea that if you start putting those systems into place now while you are still dealing with debt (if you have debt) and while you are planning on increasing your income, if that is a plan for you; I feel like that it’s a plan for a lot of people over the long term to increase income.

If you start putting a little in savings now, you know you kind of buildup that muscle. You get used to money going to savings. If you start paying more off on your debt every month, a bit more at least than the minimum so that you are making headway with the principal you get used to doing that.

If you go and use a snowball calculator and figure out how long it will take you to pay off the debt at your current rate then every time some more money comes in and you can put more to that you can go recalculate, you can see how much closer that date comes and how much less interest you will be paying. When you do get more income you will have the system set up so that you can most quickly and easily use it to move towards your goals faster rather than just increasing your expenses.

The Hedonic Treadmill

When I was in college I went to New York once to visit an older cousin of mine who I was very impressed with who had a career and an apartment. I remember talking to her about living in New York and she said that the hard thing was every time you get a raise you give yourself a few more comforts because it is so expensive to live in New York, you know.

When she first moved there she wasn’t doing things like buying coffees at Starbucks and when she got a raise then she could do that and when she got another raise she could get a bigger apartment or she could go out to dinner more now and that she felt like there was this process of just eating your raises.

I remember reading an article on the hedonic treadmill. It was the idea that when something comes into your world and changes the level you are at there is a momentary boost in happiness, You feel happier for a while, but pretty soon, even though you are at this new level of income or achievement or whatever it is, you go back to your old level of happiness at this new level of income, say.

So the next time you get a raise, the same thing happens, and you basically just get used to it; it becomes part of your life and you build it in.

A Smarter Way to Save

But again, if you have some systems in place to take either a certain amount or a percentage and keep filtering it into savings, or if you use something like, that’s a great tool to use for savings because it is based on how much money is in the account that it is hooked up to, and on the spending habits you have.

If you used to only keep a certain amount in an account, say $1,000, it would take very, very small amounts out for savings. If you suddenly started keeping $2,500 a month in that account , that’s roughly where you keep your balance, now it would be taking a little more of that money and putting it into savings. If you start keeping $5,000 in that account it will be taking even more.

That’s one way that you could do it kind of as a percentage of what you are keeping. But of course you don’t want to keep huge amounts in the checking account and I hooked digit up to a checking account so that I could see my spending habits. I’m not sure how well it would work with a savings account where you don’t actually have a lot of transactions on a daily basis.

Getting used to having savings go out and your debt being paid down in a way that’s actually paying down the principal and not just paying the interest with the minimums, if you do that right now, instead of waiting, then I think it will really put you in good stead for your future financial life.

And that’s all I really wanted to say with this episode, so thank you so much for joining me!

Let’s Keep The Conversation Going

I would love it if you would come over to my free Facebook group. That’s where we continue the discussion after the episode and where I hear from you what you want to talk about in future episodes.

So please come and don’t forget to subscribe, rate and review on iTunes. Every review helps, and I read them all to hear what you guys want more of, what you appreciate so far, and if there is anything that you would like differently, go ahead and put it in there for you! I would love to hear it! Thank you so much.

Financial Fluency Episode #51: Wealthy and Smart with Linda P Jones

This week I have Linda P Jones owner of Be Wealthy and Smart as my guest.

I’ve been listening to Linda’s Be Wealthy and Smart podcast for a little while now and it has brought up some things that I’m really interested in. One such thing is the new crowd funding options for angel investing, which we touch on in the episode, but also talk about so much more!

Linda also gave us her advice on getting wealthy, how she helps people to invest like billionaires and how to create a luxury brand business online. We also delved into the impact of the 2008 financial crisis on people’s finances and changing attitudes to investment!

You can listen in below

cover170x170Linda teaches how to achieve your financial dreams in a way you’ve never thought possible by literally transforming the way you think and learn about building wealth.

Without focusing on boring numbers, budgets, or spreadsheets, Linda makes finance fun and relatable by sharing stories from her own experiences becoming a self-made multi-millionaire. She shows people how to build wealth the right way, in a way that Wall Street and traditional financial advisors don’t teach. She believes that the Twin
Pillars of Wealth Building are the shortest and most direct paths to financial success – following the billionaire model of investing and creating a luxury brand business.

Tragedy in Linda’s personal life inspired her to share her hard won wealth-building knowledge on a large scale. After suddenly losing her husband to a brain aneurism when she was just 45, Linda felt enormously grateful that she was financially safe and secure and had the knowledge to deal with important financial decisions. It was then
that she had a new vision – to empower women all over the world in finding the same peace and security she’d experienced – and The Global Institute of Wealth for Women™ was born.

Financial Fluency Episode #50: Harvesting Low-Hanging Fruit

Often when I talk to people about increasing their savings, or increasing the amount that they want to put to pay down their debt, we look into their world to try to figure out where we can find the extra money to put towards those things.
One thing I love doing is looking at the low hanging fruit – the stuff we can easily cut down and plant elsewhere.

You can listen in or read below and Tweet it out here

Start by Looking at Your Subscriptions

Go to your PayPal account, your credit card, and even your bank, and look through your last few statements. You have a ton of recurring fees and subscriptions, right? I want you to really think about each of these. Are you really getting your money’s worth from each one?
With something like a gym membership, take a look at how much it costs versus how much you go. Would it be better value to get a day pass?
App subscriptions are pretty common nowadays too. You may have signed up for the paid version of MailChimp so that you can automate your email sequences rather than doing it all manually. How much time is that subscription saving you? What is that time worth in $$? Can you find a similar service for a lower price?

Explore Your Options

With your apps and programs, you can also look for alternatives that offer more than one service. For example, I used to use Sprout Social for engaging on social media, and Edgar for auto-posting. Both of these cost around $50 a month, and I often failed to see the ROI… but then I find eClincher. eClincher offers a combination of the inbox and the automation and costs only $25 a month. Win/win!
Go through your different accounts, and think about where you’re seeing a return on your investment. How much does each of these tools actually help you? If it’s not giving you the results that you want, maybe you need to try something else. Stop those payments for a while and look at a different strategy.

Think About Your Wind-Down Time

Cable TV can be another pretty big expense. How much would you save if you just used Netflix (with Apple TV for special occasions)?
Do you subscribe to any magazines or book clubs? Do you read them religiously when they come in, or do you have stacks of unbroken spines on your coffee table?

Evaluate Everyday Expenses

You should also take a look at your actual bills. Renegotiating some of these regular expenses can amount to a lot of savings.
I called my cell phone company and asked if there was any wiggle room, given that we have three lines in the house. They took $10 of each line – that’s a saving of $30 a month!
With your credit cards, you can always call and ask if they’ll reduce your interest rate, especially if you have one card at a lower interest rate.

Build Barriers

Another thing we can do, looking at your smartphones and tablets if you have them, is lock in-app purchases. I have kids with iPads now so I’ve had to make sure they can’t make in-app purchases without me. I do it on my own phone too, so I have to go into my settings and confirm the fact that I want to make an in-app purchase before I do it. The same applies to Amazon One Click Buying.
Try wiping all the saved credit card information from your computer too, to make it a little harder for you to enter your information to buy on different websites. If you really want to do it, you can just go to your wallet, take out that credit card and pay, but it makes it less of an impulse purchase, which helps.
Putting an extra step in between yourself and the checkout gives you a few seconds to decide if you really need that item.

Look at What You Have

Look through your purse, wallet or desk drawer and see if you have any gift cards. A lot of us receive gift cards for the holidays, and sometimes we forget to use them. If you don’t want to use them, re-gift them or find a site online where you can sell them.
Are you owed a refund for anything? Is there anything you were planning to return? Do it now.
People often forget about rewards points on their credit cards and store cards. Check in on those now and then, to see if you can either use them or cash them out.
You could also declutter your house. I was shocked recently by how much money I found in mine. I had a clear out and put a whole bunch of stuff on eBay. I got rid of electronics I’d upgraded, a few art books, and a pile of clothes from mine and the kids’ closets. I also sold a Twin Peak boxset that we’d never opened. Someone bought it for me right after I had the kids, but I just thought it was too creepy to watch with little ones in the house!
Sure, it took a little effort, but after shipping and fees I walked away with $1,300 – not too shabby!
If you commit to even one of these steps, you will see a difference.
Jump over to my free Facebook group, and let me know what low-hanging fruit you harvested! How much did you save?