This video post by staff writer Adam Baker is the last of a four-part series. Baker previously featured a post on his own blog entitled, Debt Tsunami: The Ultimate Method to Paying Off Debt.
Courtney and I have recently stumbled upon a new hurdle in our personal finance journey: complacency.
You see, we’ve experienced just enough success to make us feel comfortable, but not enough to be even close to accomplishing what we want. We budget fairly well, we live on less than we earn (or right at what we earn), and we’re able to explore passion-based income opportunities. On the flip side, we’re still making far less than we’re worth, we aren’t saving for college or retirement, and we still have a bunch of student loans.
In our current situation, I’m always looking for ways to jolt our perspective and spark a bit more motivation. In the past, we’ve tried brainstorming more exciting ways to frame our goals, or sharing empowering stories we’ve read about from others’ lives. These can work, but they’ve began to lose their effectiveness.
Recently, however, I stumbled across a simple but powerful question that helped us shift our perspective and smash our complacency:
What would you do if, starting tomorrow, your income was immediately cut in half?
To receive benefit from the question, it’s important to leave details on the sideline. It doesn’t matter how or why it happened; instead, focus on what steps you’d take if you had to live on half your income starting tomorrow. Most people would have to make radical changes.
As I talk about in today’s video, you can approach this question on the expenses side or on the income side (earning back that income quickly). Neither side is more valuable than the other, and both are worth exploring further.
Here’s a timeline of this presentation:
- The question [0:28]
- The expenses side: What would you cut first in order to survive? [0:42]
- The income side: How could you double your income next month? [2:10]
In order to derive any benefit, you’ll need to really adopt the mindset implied in the question. Don’t focus on whether it’s possible, but instead on what would realistically be the first expenses to go and the first steps to replacing the income.
Once you’ve made a list for both sides of the question, you’ll want to review it for any areas that seem realistic, even at your current full income. For example, your first steps may include selling an extra car, canceling an expensive cable package, and slashing your grocery budget in half. In this situation, you’ve likely brainstormed areas of your budget where you aren’t spending as optimally as you may like. You may choose to go ahead and try some of those options out, or at least take steps to narrow the gap between your life at 100% income and your life at 50% income levels.
The same process is important when attempting to make the income back as quickly as possible. Realistic options could include enrolling in a course (applying for aid if needed), launching a side business, and/or picking up new clients or leads. Nearly every time I brainstorm options for doubling my business income, I unearth something I hadn’t thought of before. Acting on these new ideas has helped me tremendously in generating new income (even if it doesn’t immediately double it)!
The next time you’re feeling a bit complacent in your finances, try exploring this simple question. What would be the first expenses you’d cut in order to survive on only half your income? What would be the first steps you’d take if you had to earn it back? I think you’ll be pleasantly surprised by the results of this experiment!