How to Quit Complaining About Having No Money.
First off, you need to figure out where money inflows and outflows in your life.
First discover where your income actually goes each month. Does it go all to bills? Savings? A combination of things? Child alimony? You need to know where your money ends up every month so that you can begin to identify how you can keep more of it!
There is an all-to-common mantra out there about having no money. I hear people crying about it all the time. No money to pay bills. No money to save. No money to have one night out per week. The cries are endless.
Well, here is a newsflash for you: There was probably a significant amount of money that has already passed through your life since you began earning it. Don't believe me? Take a look at this example:
Most of my readers are actually probably making well over this amount, and they're still broke.
In the above example, I use the phrase "pass through" when talking about their money. This refers to the "in one hand, out the other" that typifies money management in the U.S. In this country, it is likely that all of your income goes out the door to expenses with little to no savings left over.
As of 2015, according to the U.S. Census data, the average single individual income is just north of $56,000. So how much money does a person making an average of $56,000 earn in their lifetime? The answer: $2.2 million dollars!
Why the Hell am I Telling You This?!
To prove a point. Somewhere along the ride you decided keeping more of your income was not all that important. You may have decided a new car, new clothes, a brand-new house were all worth having savings in the "slim to none" category. You may have decided that it was more important to own something, rather than own your own life. Your decisions make the indentured servitude of regular "nine to five" employment a guaranteed certainty until you meet an early grave.
You are responsible for this. Not your neighbor, Not your brother. Not a divorce. Not the weather. Not your injured knee. Not that tree that fell on your uninsured home. It's your fault. End of story.
Why do we need the pressure of it being "our fault"?! Because by assuming it is your fault, then you can begin to understand that you are the one responsible for changing it. Life happens to all of us. Unexpected expenses will continue to come. They do not end and they come at the worst time. Even innocent expenses like birthdays, holidays, baptisms, wedding, you name it, will continue to come at the most inopportune time. This is life my friend.
I take the extreme "my fault" approach to money management because it carries with it a zero-tolerance policy for excuses. Excuses are wasted energy. They rarely, if ever, do anything to change the actual situation at hand. Excuses are a bullshit coping mechanism that are designed to make you feel better about why you are not doing better. They are also used to help explain to other people why you aren't doing better in the hopes they won't judge you (trust me, they still are judging you unfortunately).
In the words of the late Jim Rohn...
"Don't wish it were easier, wish you were better".
You are the one allowing all of your money to be directed to accounts other than your own. In many cases, if you posses any type of debt, you are actually spending more money than you have even made in your lifetime. So while the lifetime earning numbers that we calculated above might be very impressive (especially if you make more money than the example I provided), you may actually find that you are spending more than your annual after-tax income.
To make the examples above more accurate, use your actual tax returns from previous years and add up what you have made in your lifetime (note: if you need these but don't have them, visit the IRS Website's "Get Transcript" page) . This can be a very empowering, or very depressing, exercise. If nothing else, it should merely demonstrate how little awareness you have about how much money you actually have made.
The concept of calculating your lifetime earnings is a great place to start to introduce you to your income and create a visual of how well (or poorly) you have managed it throughout your lifetime.
Although this is not completely necessary, I do feel it is an important first step to understanding how to manage your money. If you would like greater depth on this concept, take a look at one of my favorite personal finance books, Your Money or Your Life by Viki Robbin.
Where To Start If You Want to Improve Your Money Management Skills...
You have two options:
The reason why it is important to start here is to understand where you stand. You need to know where you are in order to understand where you are going. If I told you we needed to take a trip to Portugal and we needed to outline how to get there, we must know where we started (especially if we are already in Portugal).
If you insist that you cannot attain a positive net worth, or that you do not ever have enough money, how can you possibly know if this is correct unless you look at your inputs. I don't mean simply looking at your checking account every other week, I mean look at your longer term trends. If you were 100 pounds overweight, you would not assume that your dietary habits in the last 14 days was entirely responsible for this.
Pick one of the above, and get started. Increasing your net worth can literally be as simple as gaining a deeper understanding of your personal financial snapshot. Just knowing how much money flows into your life (lifetime earning) or simply understanding how much you have saved in your lifetime (part of net worth), you can begin to identify areas where you require significant input (expenses, savings, tax efficiency, retirement accounts, investing, etc.).
Part 1 concludes with encouraging you to understand where you are starting from. Two choices, 1) calculate your net worth or 2) calculate your lifetime after-tax earnings. Regardless, you decide. It is about getting started and this is proven to be an ideal way to get your ass moving on improving your money management skills.
Dr. Jon is a physical therapist by day, and a dedicated frugalist by night, deeply enthralled in the thrill of "pinching pennies" and investing the margin.