Please enjoy this guest post by Brent from VOSA. Brent’s a world record holder, inventor, engineer, entrepreneur, world traveler & eternal optimist. You can read more of his writing about personal finance, entrepreneurship and travel at VOSA.com.
Have you ever thought to yourself: “If only I made more money… then all my problems would be solved.”
If you have, then you are not alone.
Many people think that if they could just make more money the problems and stresses associated with mismanaged personal finances will just magically disappear.
The unfortunate reality is, more often than not, the problems don’t go away. Often they get compounded.
The reason for this is because more money typically cannot solve poorly managed money.
If you aren’t able to manage your money when you’re not making as much as you’d like, you’re definitely not going to be able to manage it when you’re making a lot more than you are today!
Don’t get me wrong, I’m a strong supporter of making more money and I feel that it’s the best way to secure one’s financial independence.
I always encourage people to focus more of their time and effort on increasing their income through side hustles rather than focusing on cutting every last penny from their expenses. You can only reduce your expenses by so much but you can always continue to make more and more money.
Making more money is like possessing a superpower and as the famous lines goes, “with great power, comes great responsibility.” The same goes for your new found income.
As you set out on, or continue down, your own money making journey I strongly encourage to make sure your financial house is in order before you get started.
The first thing you should do to make sure that your financial house is in tip top shape is to create a budget by tracking every single dollar in and out. This will help you gain total control of your finances and become awesome at managing your money.
There are many different types of budgets that and ways to manage your money. Many of them are excellent, some are okay and some are downright terrible and unrealistic.
In my opinion, two of the most important things that your budget needs to be are realistic and flexible.
Wouldn’t it be nice if groceries were exactly $265 each month? Or that you spent exactly $180 per month on gas? Of course it would because that would make budgeting extremely simple but we all know that this is not reality.
Your expenses vary from month to month and the amount that you budget for these spending categories will simply be a best guess based on your past history and, of course, what you can afford.
You need to pick a budgeting technique that allows you to reallocate funds from one spending category to another to stay on budget and to even go as far as to borrow from yourself if you cannot reallocate enough money to cover the extra expense one month.
Of course, you can’t borrow from yourself when you’re spending next month’s money on this month’s expenses. You need to be working ahead and spending, at least, next month’s money on this month’s expenses so you always have a cushion in case life throws a twist in your best laid plans.
The best way that I’ve seen to accomplish this is to use the extremely popular budgeting software YNAB (You Need A Budget) that can help you gain total control over your finances, save more money, pay down your debt and break the paycheck to paycheck cycle once and for all.
Before we get cover the four basic rules of YNAB I want to share with you two facts:
- $200.00 is the average median net worth increase of a YNABer after just one month
- $3,300.00 is the average median net worth increase of a YNABer after nine months
Just imagine how you would feel if your net worth was $200.00 higher in a month and $3,300.00 higher just nine short months for now? I’m sure you’d be feeling pretty darn proud of yourself.
Just like many of people just like you, you too can achieve this kind of success by following the four rules set forth by YNAB:
Rule One: Give every dollar a job.
Rule Two: Save for a rainy day.
Rule Three: Roll with the punches.
Rule Four: Live on last month’s income.
These rules will allow you to create, set and stick to a realistic (but flexible) budget that can help you reach your financial goals.
Don’t forget, as you work towards making money your way, you need keep track of your income and expenses so you don’t find yourself in a sticky financial situation that might jeopardize your financial health.
If you’re interested in getting started with YNAB today is your lucky day. As a way to say thank you to my readers I have dug deep into my own wallet and have purchased 10 copies of YNAB for a total value of $600.00 and I will be giving these copies away to 10 lucky winners.
Click here to enter the sweepstakes so you have a chance to win 1 of 10 copies of YNAB (You Need A Budget) so you can get started down your path to financial freedom the right way.
I hear this constantly. I taught a class recently and almost everyone said, “I would be fine if I just made an extra $10,000 a year.” NO! You would be fine if you got your spending under control. It is not what you make, but what you save. If you don’t do that first it doesn’t matter what you make you will just end up spending more. It’s funny that the more we earn money the more our spending increases. Many people save when they have $25,000 a year but when they move to $50-60,000 a year they have less because they spend more even though they earn more than they ever have in their life. They max out mortgages, car loans, etc. It’s hard to get a new job or raise and not increase our spending because we have more money. If our first thought is to not spend more or decrease our spending then we will be good no matter what we make.
Lance @ Healthy Wealthy Income recently posted…Retirement Planning Gone Bad; A Life of Misery, Will You Be the Next Victim
Agree completely. Lifestyle inflation can be hard to avoid making more income just compound the spending problem! Thanks for the comment.
Brent recently posted…Why the U.S. Airways Premier World MasterCard is a Travel Hacking No-Brainer
This is exactly why most lottery winners end up blowing through their money within a few years, having a lot of money doesn’t make up for not being able to manage it. In fact, I spend less money now than I ever have and I feel much richer. I’m not wasting as much as I used to. I also avoid temptation and impulse buys. By managing my spending I actually feel like I have more even though I’m spending less.
Thomas recently posted…37 Easy Small Business Ideas
Great job on spending less and feeling richer. If you could bottle that and sell it you’d be an even richer person! Keep it up and thanks for the comment.
I’d would still go for strategically handling of money than making more money. This is tried and tested in my case. Had three jobs before, still I did not save money and found myself overspender. I wish I could have obtained that skillset back then.
Jayson @ Monster Piggy Bank recently posted…Why I like to average down on shares
Better late than never, don’t beat yourself up over your mistakes from the past. Thanks for the comment.
I can see how a sudden influx of money would cause a person to spend less responsibly. It would be a major temptation to do or buy the things you wanted but couldn’t afford before. It makes complete sense to get your spending in check before that day comes. I’ve read good things about YNAB.
Natalie @ Budget and the Bees recently posted…How to Set Up a Family Binder
I agree, having a plan in place is a huge advantage. YNAB is a great way to get that plan in place. Did you enter the giveaway?
Great post Brent!
“The unfortunate reality is, more often than not, the problems don’t go away. Often they get compounded.” – This is so huge!! I’ve seen this time and time again and actually, that was me back in the day!
These days I find I do the opposite. The more money I have, the less spending I seem to do. Whereas, they less money I have, the more I am apt to spend it without much thought!
Thanks again Brent for the advice and take care. All the best.
Lyle
lyle @ the Joy of Simple recently posted…Embracing Your Weirdness
Lyle, great to see you around and thanks for the comment. I’ve seen so many people who make a LOT of money who are always broke for some reason. Learning the money management side first, starting today, is the way to go. See you around!
I find that the simpler I live, the more fulfilled I am, but that I don’t spend much either. It is like effortless wealth building that brings health and happiness along with it!
Sounds like you have got it all figured out! Great job and thanks for the comment.
I used to think more money would solve my budgeting problems too, and it would help to some extent, but I need to get ahold of how I use my “extra” income each month. I’ve been essentially wasting my “extra” income on fun things instead of putting it in my EF or towards debt and that’s not okay! This month I did end up using all of it on a car repair and a new computer (so I can keep side hustling), but still, there’s no excuse for every other month’s “extra” income being spent instead of used wisely.
Kayla @ Red Debted Stepchild recently posted…August Blog Income Report
Make sure to learn from your mistakes and then move on. Don’t dwell in them and beat yourself up. Great work on having an EF to cover the cost of your car repair. Thanks for the comment.
Of course, getting more money is not the answer to solving your budgeting problems,. But it sure is nice to have the extra cash.
Brad @ How To Save Money recently posted…Saving Money by Being Held Accountable
Money can solve a lot of problem, I’ll agree. I just hope that everyone has a plan in place as sometimes the music does stop and without a plan you might not have a chair to sit in. Thanks for the comment.
I don’t think making more money is ALWAYS the answer, but it can certainly help. If you have $50,000 in student loans it’s a lot easier to pay down on a $100k income than a $50k income.
DC @ Young Adult Money recently posted…5 Things Every Blogger Struggles With
Agree completely if the person making $100k has a plan in place to funnel more month towards their student loan instead of a new Audi, eating two meals out per day and bottle service in Vegas. Thanks for the comment.
I can be really aggressive with spending when I get a spike in income, but part of that spending aggression goes towards investing more into my ventures. It has served me pretty well to have a portion of my funds going into a “pot” of potential gains as I sort of counter some of the frivolous spending (if only just a bit). I’m trying to find the balance between investing extra income, and straight up wasting it.
How would you feel about funneling some of your frivolous spending into more speculative investments? Would that satisfy your wasteful spending needs while possibly hitting a few investing home runs along the way?
As a new freelancer, make sure you build that emergency fund to get you through the slow months. Thanks for your comment.