The 50% Fix
Why does it seem so hard to get ahead? It seems like a hundred pennies hit your hand for hard work, then when all the dirty hands come in and get their cut, you end up with...nothing! Where does it all go? Well, the truth is that dirty hands don't come and take it... you give it away blindly.
People have a tendency to live slightly above their means, up until a certain upper class income level (there is a level of rich where it becomes difficult to spend all of your money even on the most frivolous things). This could be attributed to many reasons which have been beaten to death by other financial blogs. Basically car, mortgage, and other recurring expenses leave little left, you're probably not saving for retirement, and scraping up change from couch cushions to pay bills. Hey, I think many of us have been there, so no shame. What can you do to get out of it?
I propose the 50% fix. I came up with this idea because I have recently had to take a (temporary) pay cut at work, to 75% of what I typically bring home. That cut went across the board, company wide. We're a small but dedicated crew, and are inching our way back out of a deep, dark trench in the ocean, and we can see the light at the surface at last.
Being forced to instantly drop 25% of my expenditures because I had to is no different than doing so by choice - it's just a matter of force vs volunteerism (Fly United much?). The cut made me take a real hard look at where I'm wasting money and start being more conscious of everything. That's quite a strange feeling when you write for a financial blog, because I already thought that I was pretty critical about where my money goes, how I'm saving, investing, etc.
There are a few trends that I noticed right away:
1.) Instead of eating out, I eat at home.
I've talked about this one before in previous posts. Living a middle class, unmarried life, it's pretty easy to just hit the nearest sandwich shop or burger joint when you start getting hungry after getting home from the gym or work. Part of saving money in this aspect goes with #2.
2.) My frequency of "bear dinner" has become much higher. Probably 2 nights a week, instead of once every 3 weeks.
Bear Dinner is a term my brother and I use to describe demolishing anything in the pantry that has the capability of giving to sustenance in no particular order. Imagine a bear coming to the scene of a delightful, well lit picnic area filled with tents in the middle of the forest. The bear doesn't much care what he eats, so long as it is edible. On to demolishing he goes. Sandwiches, clif cars, chocolate, trail mix, marshmallows, beef jerky, children. Any of it and all of it is food. I think I might dedicate a whole post to Bear Dinners some time in the future because they're such a great money saving tip. It's one thing to go to the store, obtain ingredients, and cook something following a recipe or otherwise. It's even better to destroy the aging contents of your pantry like the ravenous beasts we all are once in a while.
It is a relatively rare occurrence that I would not be able to literally scrounge something up between what I have in the fridge and what is in the pantry. There is almost always something that can be consumed. Perhaps its a half empty box of penne pasta that you have leftover from the time you made some alfredo Italian dish several months ago. Rolled oats. Can of sardines and tuna. 3 spoonfuls of peanut butter. A maruchan ramen packet. A can of green beans your roommate bought for Y2K. If you're lucky there might be a pepsi in the wayyyy back with some cobwebs on it. I can't guarantee it will be tasty or safe, but it's still got calories, and you're a bear. That's what you're after.
3.) Cancelling expensive subscriptions
The instant reduction in pay prompted me to call a few places and cancel subscriptions. I called the wall street journal, told them I wanted to cancel, and after a 3 minute phone conversation they reduced my paper from 39.00 per month to 14.95 per month, with no contractual obligation. I was pleasantly surprised at how willing most companies are to reduce your rate for obtaining the same service, just to keep you as a customer! The dangerous part here is making an empty threat, of course. Don't go calling your cell provider and saying you're going to drop their service, they might just do so no questions asked. Then again, they might offer you better rates as well. I haven't personally tried with Verizon.
4.) Fix broken things instead of replacing them.
This goes without saying for much of us flip-oriented handy type folks, but it also prompted me to react much more quickly than I otherwise would to an unusually high water bill. A plumbing estimate later, I have a good idea of at least what it's going to take to diagnose the problem, and after which I'll be saving money on water each month from a leaky pipe somewhere. In my particular situation I definitely won't be saving money in the long run, but the repairs have got to happen eventually, so sooner is better.
Now that I had considered the above and reduced some unnecessary expenditures, it's time to take the next step. A good goal is to save 50% of your after tax income into retirement or investments. The only way you're ever going to do this is to bite the bullet and place yourself in the shoes of someone who has just taken a 50% pay cut. Treat the 50% that you invest like it isn't even there. You have no choice but to save or invest it. Living your life in this way will force you to make some hard choices. Perhaps you need to sell your car and get something cheaper so you don't have a payment each month. Perhaps you're living heavily above your means by having a house that is much too luxurious or large. Time to swallow your pride, and downsize to something more manageable. Find old shit that you don't need and sell it. Freeing up space is a little like freeing up money. Less stuff = less things to worry about.
I'd like to make a pledge to my readers. From the moment this article is published, I will save 50% of my income for investments or retirement for a whole year. On April 12, 2018, I will write a follow up post saying how I did and what the plan is from there. Some monthly updates would probably be good as well, so keep an eye out for those. I will also have a kickoff post saying how I intend to change my lifestyle in order to support my choice. I would like to clarify that I'm only going to consider income from my salaried job as the 50%. Any money that I make by flipping cars, side jobs, etc I will keep off of the savings bracket. I typically allow those income sources to build upon themselves (buy a car for 2K, flip for 3K, buy another car for 3K, flip for 4K, etc).
I'm very curious to see what forcing myself to live halfway below my means will be like. Perhaps I'll love it. Perhaps I'll hate it. Only time will tell. I encourage you to take the pledge with me! Comment below whether you think I'm a genius or an idiot!
WHAT THE HELL DID I JUST GET MYSELF INTO