Reader Question: What if there is nothing left at the end of the month?

by Kevin on May 28, 2008

I recently received a comment on my post 10 Steps to Avoid Becoming a Millionaire.

Why is it that some people seem to think money just falls out of the sky. I take 3% for my 401K and it’s magic! Another 3% materializes out of thin air and the electric bill still gets paid.

I have news for you. Sometimes the salary you get covers things like rent, food, electric, water, clothes, groceries, medical bills, etc etc and sometimes there really isn’t 3% left over at the end of the month. Sometimes there isn’t even 1%.

Now I would really like to espouse that old “pay yourself first” thing I’ve heard, but there is something interesting there. What’s interesting is that I don’t send myself a cutoff if I miss the electric bill, I don’t send myself an eviction notice if I don’t pay myself the rent.

Some of us don’t have a pot to piss in or a window to throw it out of and whether you believe it or not, it can really not be from lack of trying or failure to relocate or some other cockamammy reason that’s always given for being poor. So cut us some slack, OK? Not everyone can “afford” to save or invest and we’re getting damn tired of other people acting like that’s a moral failure!

Now, for my response.

Kelly, I am sorry to see you have taken offense to the article. I’m open to discussion and appreciate you stopping by.

The simple fact that sometimes there isn’t 3% or 1% left over at the end of the month indicates to me that that person is not spending less than they earn. If your expenses are right up next to your income, you’ve got a problem. You probably know this, but maybe don’t know how to fix the situation.

You have two choices in this situation — spend less money, or earn more income. Spending less money is usually easiest as most Americans live a life of relative luxury compared to other countries and to previous generations.

That may sound ridiculous and over the top and that’s okay. Some of you will disagree with it and there are exceptions to every rule. But do you have a cell phone? Home internet? What cable plan are you on? These are three quick hits to cutting down on your budget that could save you at least $100-150 each month depending on your service levels. If “But I can’t live without a cell phone or TV!” is your response, well there’s the problem and why you have no money left at the end of the month.

Starting with those monthly plans is a great way to cut money. I’m not saying it will be pleasant by any means. Life without a cell phone or internet at home would not be enjoyable for me. Those communication devices are awesome. However, if you are just treading water with your finances — or worse, you are under water — it might be a necessary step.

Budgeting is another key factor to controlling your money (rather than it controlling you). It absolutely changed our financial life. It’s step one of my No Debt Plan. Sitting down and figuring out where you have spent your money each month for the last month or two can very eye opening (what do you mean we spent $300 eating out!).

And if you haven’t been inspired enough, Get Rich Slowly tells us the story of Crissy Thompson, “The Coupon Queen.” She pays around $10/month for groceries for a family of five. Legally. By using coupons. It takes a ton of work, but if you could save $200 per month on groceries that’s a huge impact!

As I mentioned, there is another way. Perhaps you have cut your budget to the bone. There is no wiggle room left. Your only other option is to make more money. Get a second job. Work on the weekend. Find ways to earn alternative income. In the past month and a week, I’ve earned over $400 blogging online (not on this site, on others). That’s not going to pay off the mortgage tomorrow, but it isn’t exactly chump change either. If I were in a desperate situation I would find a way to work at least 10 hours on the weekend, even if it was at $7/hour. That’s an extra $52.50 each week after taxes (assuming a 25% tax bracket). For a four week month that would be an extra $210 to apply to debt, build up savings, or to invest. It might not be much, but it could keep your head above water.

Obviously my original post about how to not become a millionaire took a reverse look at things. Saving 3% of your income may be a big milestone to you, so make it a goal and strive for it. Take some of the steps above, and see where you land in a few months.

{ 8 comments }

Philip Robert May 28, 2008 at 3:32 pm

Kevin, Great response. How many people are out there letting their money whip them around? How many other Kelly’s are there who really believe that they have no control over their spending. When I first started really looking at getting out of debt the budget was terrifying. I had no idea what I was spending money on or how much. Pretty soon things started to line up and I can predict very closely how much I have t spend on gas or food. Using a budget gave me a pay raise and I no longer fear the end of the month.

Great post

Kevin May 28, 2008 at 6:53 pm

That’s the beauty of it Philip. I can accurately estimate how much we will spend on food and gas, too. It makes planning for saving, investing, paying down debt, etc. that much easier because you have a target. You know what you should have left at the end of the month.

Life is always going to happen. You’ll get a flat tire (or two, like I did within a few months of each other). It’s inevitable. But walking around through life without any sense of financial direction is very dangerous.

Fiscal Musings May 28, 2008 at 9:38 pm

I hear from a lot of people that they’re just getting by and making ends meet. These same people though don’t think anything of having a cell phone, premium cable or satellite, or high speed internet like you mention. They also have no problem eating out or just “picking up something quick” on the way home.

When people just can’t seem to make ends meet, it’s usually time to re-evaluate the difference between needs and wants.

Stephanie PTY May 28, 2008 at 9:41 pm

I saw exactly that sort of behavior in a friend of mine. He complained constantly about making ends meet and the credit card debt that loomed over his head. But he had no problem getting fast food most of the time and going out drinking more than once a week. He’s made some great improvements over the past few years – including two biggies: moving out of an insanely expensive city, and working hard to get more stable, better-paying work.

The solution is out there, but some people have to step back and really look at what they’re doing that could be changed.

Patrick May 28, 2008 at 9:45 pm

Kevin, I think your response was a good one. There are always exceptions to the rule, and perhaps Kelly’s situations is one of those, and your response won’t work for her situation. But I am positive it will work for some other people in similar situations.

Andrea >> Become a consultant May 29, 2008 at 12:53 am

Hey, I saw your post on GRS and just wanted to thank you for calling my attention to the Feedburner animator. I saw it in your sig. Great tool.

Kelly May 29, 2008 at 6:53 pm

Kevin, I really didn’t take offense at your article – it just hit a nerve on a day when I am between jobs, no more savings and I had just maxed out my credit card to pay bills for another month.

I think the thing that irks me more than anything else is the casual “just get another job” or “just move” for every money ill. It’s never just that easy and I think everyone knows that.

I seriously expect to be working again in a month because if nothing else I’ll take a minimum wage job by next week which will at least pay the rent. And there are things that I can cut off as you say, although I’m trying to hang on to my computer with every tooth and claw I have. And I hate to admit it, but I’m the last person with a land line which, by the way, is almost a necessity for job hunting. The last time I asked if I had to leave a phone number I was told yes, because the business didn’t want to hire anyone that was homeless.

Once I am working I do plan to do all I can to save and incorporate a lot, if not all, of what I’ve read on your blogs.

I do thank you for your taking the time to address my post. At least you have an awareness of the situation and think it can be helped. And I can’t tell you how much I, and so many others, appreciate that.

Thank you again.
Kelly

Kevin May 29, 2008 at 7:24 pm

@Kelly: Oh trust me, I know “just getting another job” isn’t as easy as it sounds. When I graduated college, everyone was looking for 3-5 years of experience. How am I supposed to get 3-5 years of experience if no one will hire you to start?

Best of luck and hope to see you back around here, hopefully with positive news on the job front.

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