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Initially money seems simple. We get it for work or extra things we produce and we trade it for what we don’t have. It has been around forever and is used by everyone. My kids understand the value of money and use it (both of them started around the age of 5).
However, it is also very un-simple. It is a major stressor, a reason for many divorces, even a cause for suicides.
Money is a big deal
- We all need money
- We all use money
- We all (or I don’t know anyone who doesn’t) could use more
- We spend a large portion of our life getting it, spending it, or thinking about getting or spending it
These are universal for both those with only a little money and those with a lot.
But what makes it un-simple? I think this is the key:
Those who are not stressed about money are those who spend less than they make.
People who consistently spend less than they make are not in dept, have emergency funds in place, and can save up for what they want. All of these things, when present, remove money stress creating a simple money life.
Life throws us lots of different seasons with regards to money. Sometimes we make more, sometimes we make less. Sometimes huge expenses come up, sometimes investment opportunities present themselves. Life is just crazy like that.
Right now we are making less than we have for almost our entire married life. It seems to be the season we are in right now. We are choosing to be self-employed and we are choosing to be a one income household. In this construction economy it makes for a low money season. But it is just that – a season. We are working hard at generating other income streams as well as working to keep ‘money in’ above ‘money out’ even though it is harder now.
Are you stressed out about money? Are you going through a ‘low money season now?’ or are you spending more than you make? Spending everything you make?
Then something has to change.
- Look at reality – Ignoring the problem won’t make it go away. Make sure you know exactly where you stand financially.
- Figure out as much as possible about your money flow – Where is it all coming from and where is it all going? It takes time and work, but it is too important to not understand. Make sure to understand all loans, insurance policies, and all contracts you have. Sure it is complicated, and if your money is going there you need to understand it.
- Realize you are still in control of the situation – Could you work another job or two? Could you sell assets? Could you eat only rice and beans? Yes, probably. Hopefully you don’t have to go to any of these extremes but you are still in control of the situation and your financial decisions. You do have other options, you are choosing between them. You are not stuck!
- Work on long term income growth and short term expense cuts – Emergency is to get expenses below income. Goal is to increase income to give expenses room to breath.
- Spend for what matters the most to you (and your family) – This is personal and something you will need to decide. What matters the most to my family and I is that we have the freedom of self-employment and that the kids can be home and homeschooled. To be able to afford that right now we are living in a small apartment and spending as little as possible. Sure we wish we had more money for different things, but we are happy with our decisions.
A good tool is Dave Ramsey’s calculator. It helps you figure out what percent you are spending in each category and what categories are (according to his recommendations or averages) a bit high.
The beast of money will either be a tool to create your life or it will be a slave driver. The crazy thing is that it isn’t how much you make that decides which role it will fill. It is you.