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!
This article is about Budgeting, Odds and Ends, Psychology
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Nice article. Wow, how would I live on half my income? I would look at my budget and slash a lot of the discretionary expenses. Next, I would reduce the food bill and start buying more in bulk. I would use less heat in the winter and less AC in the summer. I might have to cut savings as well.
It would be tough, but it’s a great exercise. Thanks for making me think about this. I think I will blog about this on my site in a future post.
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Well I’ve done this a few times now!
First when getting laid off I finally took at job at 1/3 of my previous salary and had to adapt to that by cutting out just the “wants”, and not really putting much into savings and not paying down much debt. I redid the budget to reflect the absolute minimum needed to pay the bills.
Then a few years later I was married and after we had our youngest son I became a SAHM we had our income slashed again and I started being very frugal with the groceries and other household spending. I also implemented many things from Dave Ramsey’s teachings. We had to give every dollar a name and not deviate from that plan.
Then when my husband got laid off and focused on being self employed our income was about cut in half again. That is when we did things like ditch my cell & go to prepaid, eliminate the land line w/DSL, ditch Satellite tv and get basic cable w/internet. Fortunately we have no car payments, but if we did we probably would have sold a vehicle and traded down (which most people I know would NEVER consider doing!). And of course your priorities just change dramatically and you cut out any extraneous spending. You really have to think what is important, and may surprise yourself as to where so much of your money has been going.
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Very interesting idea. Good luck – you definitely have the drive, so I’m sure you’ll accomplish whatever financial goal you set.
I’m not sure what I’d do if my income was cut in half BUT I definitely can relate to this feeling of “complacency”. After I met certain basic financial goals (i.e. emergency savings funded, Roth IRA started, regular investing started) I fell off a little bit, but I’m just about ready to get back in the “frugal game” and really go after my $24K student loan balance until it’s gone! Wish me luck!
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Wow, that is a good thing to contemplate. Let’s keep in mind that if your income were cut in half, you’d be in a lower federal tax bracket, so your take-home pay would be greater than half your current take-home pay. But maybe the exercise is based on a theoretical halving of your take-home pay. Whatever. I also assume that this would mean switching to part-time work. I would try to find another part-time job to fill in. Of course it’s tough out there. I personally couldn’t cut cable, because it is included in my condo assessments (association dues) and thus required. It’s only $35 a month anyway. I wouldn’t want to cut Internet; it would be tough to job-hunt without it. I suppose I could use the Internet at the library (free air conditioning, too!), but you can sign up for only 30 minutes at a time. My Internet bill (from the phone company) is only $19.95 a month, so I probably wouldn’t cut it. I live in a major city and don’t have a car, so I wouldn’t have that to cut. Likewise I have no cell phone, so I wouldn’t cut that. I would eat out less (brown-bag my work lunches rather than eat in the cafeteria), make sure that we at out only at inexpensive places (large cities have a lot of fun, cheap ethnic restaurants, which I enjoy now), and cut back my on my 401K contributions. (I’m over 50 so I can contribute $22K, so I’d probably cut back.) I guess I would cut back or maybe even eliminate charitable contributions, much as I’d hate to. I’d also hate to stop paying my unemployed friend to do home repairs for me (which is helping both of us). Certainly I’d stop recreational shopping; I’m sure I have enough stuff. My condo is paid for. Sorry, I seem to be rambling here; this isn’t a school essay that you plan out on note cards (OK, I’m dating myself). I think a strategy would be to break down all spending into categories, and then look for cutbacks in all categories if possible (utilities, groceries, entertainment, etc.). Good luck to those for whom this is more than just an intellectual exercise.
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I actually like that this is one of a handful of PF blogs that often (not always since there are some staff writters who have children) takes a look at the childfree perspective of PF without parading a view either way. This seems to be such a balanced blog in that aspect.
It seems to me that nearly all fugality blogs are hopelessly mired in saving on children’s expenses, or focused on saving for those expenses. I am not offended by blogs of parents in PF. I just want some that are more relevant to my lifestyle choice every so often and this blog has excellent content and a balanced take on how to get to any finacial goal regardless of being a parent or not.
I appreciate how JD & Staff put so much effort to keep religion, polictics and social (and possibly easily offending) views off the site!
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@lil:
“You may not realize this and probably did not mean to, but it is VERY insulting to call a mother or father who works as not being a ‘full-time parent.’”
But they’re not.
You can’t be employed “full-time”, and also be a “full-time” parent.
If you find it “insulting,” maybe that says more about how you feel about your own choice than it does about the language being used.
If you want to talk about what’s “insulting,” I can only imagine that stay-at-home parents would find it equally “insulting” that someone who puts 40 hours per week in at an office, while someone else raises their kid, would try to claim that they’re just as “full-time” of a parent as ACTUAL full-time parents.
THAT’S “insulting.”
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J.D.: Parents tend not to like parenting advice from parents either. You really can’t win. It’s a war zone re: parenting choices out there, and all that tells me is that overall families with kids are not feeling well-accommodated in the current economic structure.
Glad the family factor finally got mentioned though. Similarly our first cutting area would have to be kids’ extracurriculars, second would be quality of nutrition, third would be heat, then we’d sell the house or take on a tenant rather than lending our basement apartment to a friend.
Parenthood has three-quartered our income and nearly quadrupled our expenses. We didn’t have a car, for example, before the kids started begging for us to please get out of the city sometimes. And how do you say no to that if you can afford it? “No, kid. Go play in the parking lot. Trees aren’t all they’re chalked up to be.” Our only financial fat is kids’ activities. With two kids and no consumer debt, we have very little to cut re: grownup expenses. (Um, we get takeout once a week so I can stop cooking for a minute?)
Etc. etc..
That said I’m constantly looking for ways to bring a little in here and there while I’m mostly at home. This will get easier when they’re both in full day school. Day care + summer camps would cost more than my salary as an arts professional, so I opted to stay mainly at home for seven years. Opted being a strong word. It was a financial no-brainer, and I personally felt I had no choice. On the other hand other parents I know feel compelled to work full time because in their particular situation that makes the most sense. Truly every situation is different, and no doubt everyone is doing what they can to provide as much as they can for their kids.
Financial factors aside, some people freely admit to not being able to handle the stresses of at-home parenting. Self-knowledge is key to this gig. Better the kids are in daycare than cared for by a no doubt loving but resentful and unhappy parent. Loving the act of parenting and loving your children are two very different things.
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