We are moving towards scary times. Student loan payments are returning, rents are increasing, home insurance is sky-high, and food costs are outrageous.
The world is applying pressure to the average American household, and things may look bleak. What’s the typical American supposed to do to beat the odds?
When all else fails, return to the basics. No matter your income level, you have some level of control over your spending and saving habits.
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I am not here to wag my finger at you and tell you to stop drinking Starbucks; you already read enough of that.
However, if you do not review your budget spreadsheet every day, you will continue to lose ground to inflation and other price-gouging metrics.
A budget is freedom, not control. I used to believe that living on a budget meant I would lose my freedom. At that time (around 2008), budget was a bad word.
I had a checking account for utilities that I would feed $800 into upon receiving my check. As long as I paid all of the bills, I gave it little consideration.
How to Use a Daily Budget
However, when my wife and I returned from Japan and moved to Florida, I began keeping a detailed spreadsheet of my bills.
I was surprised to learn how much shadiness the utilities, streaming, satellite, cable, and phone companies would inject into their monthly bills.
I really started comparing my month-to-month payments and noticed weird fluctuations and extra charges. This was the start of my success with money.
Document every penny. You should document every penny, nickel, and dime that comes into your household—that’s how you take control of your finances.
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When you look at your spending at the microscopic level, you begin to notice trends and avoid traps. Most households do not keep a strict budget, hurting them in the long run.
Beyond tracking your income and expenses, you must think critically about your goals and household aspirations.
That’s right; you should have a mission statement for your household. It could be something like “To save $1,000 over the next three months.”
Making the necessary changes. You must make big changes to have success with money. Working your standard job isn’t enough to advance in this new world order.
Become Middle-Class PLUS
Let’s look at the budget and see how we can save $1,000 over three months. Let’s say our family earns $6,000 per month.
Their rent is $2,000 and food is $1,200. They also have student loans, car debt, and bills of $2,000. That leaves them $800 for discretionary spending.
The first step is to hone in on their food spending. Spending $1,200 is okay if they are not wasting food.
Also, they need to review their extraneous bills, such as streaming and eating out. Once you have more income, you can bring these extras back into your life.
Create Money, Spend Money, Grow Money
They can probably reduce expenses to $4,800 (from $5,200), allowing them to save $400 per month.
Adding more income. The key to life is not only budgeting but also adding more income. There are only two ways to become wealthy—reducing expenses and increasing income.
Most people focus on reducing expenses but never consider increasing income. However, working a second job or performing gig work is not the long-term plan.
If you genuinely want to change your financial future, you’ll need to make money while you sleep. When you exchange time for money, you limit your daily earnings.
When you focus on passive income, you give yourself the chance to make money while you sleep, eat, or play.
Income Investing vs. Inflation 2
Sadly, passive income is elusive for the average person. They believe that only rich people can acquire assets that generate revenue.
Welcome to the new digital era. Investing in stocks was much more difficult twenty years ago. Now, everyone with a cellphone can start building passive income via dividends.
As the family aggressively reduces expenses, they will need to save and invest the difference. The more you invest in dividend-paying stocks, the more income you generate.
My wife and I started dividend investing in July 2019. I received $0.25 in my first month of dividend income.
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However, we keep reducing debt, lowering expenses, creating more income (from roommates, and investing in dividends).
Now, we earn roughly $1,300/month in dividends. Can you imagine receiving an extra $1,300 just for waking up in the morning?
Even earning $100 per month in dividends can change your life. You can use the money to treat your family to the movies or pay for a few subscription services.
Wealthy is a choice. Money loves discipline; what you measure, you manage. I have documented every dividend I received over the last four years.
Every Day You Create is Great
I’ve recorded every bill we paid since August 2017. It’s not a shock that my wife and I went from $77,000 in debt to $300,000 in the bank.
True wealth lies on the other side of tough decisions. Getting roommates isn’t fun, but it could be necessary.
You can ask family members to move in with you so that you all can start building wealth. You will need to focus on obtaining assets every step of the way.
Obsession is key. As you convert from a spender to a saver to an investor, you must become obsessed. Everyone will say you changed or only care about money.
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They will say you need to find balance. When you start to hear these things, you know you are on the right path.
Conclusion. When people say you need to find balance, you can laugh aloud. My wife and I retired at ages 39 and 42, respectively.
Now, we can watch our kids go to school every morning and be here when they arrive. My youngest son and I play video games and throw the frisbee daily. I am freaking balanced.
I wish you could see our quiet retired life on three acres in Florida inside out. Just now, we worked our butts off to get here.
Start Your Season of Saving: Let’s Save $100,000
We had roommates for 4.5 years, I wrote books and took a second job, and my wife held down the fort as I was gone for three straight years.
Now, we have arrived. You can get to your final destination if you create a plan. It all starts with a hardcore budget. Once you track every nickel, it is time to add more dimes (increase income).
Don’t watch all the TikTok inflation videos and feel sorry for yourself. It’s time to make a massive change to your finances. Start by reviewing your monthly budget every day. Good Luck!
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