Are you feeling financially stuck? Do you live paycheck to check and feel like you’re never going to get ahead in life? Does paying bills seem like an endless cycle? Are you letting debt consume your life? Is it difficult to set money aside for emergency funds? Are you ready for a change and get unstuck?
What if I tell you there is a way out?
Do you ever think, “If I could only earn more….”? Such thoughts keep you stuck. With a higher income, maybe you want to upgrade your home (or move to a more expensive neighborhood), your car, travel to more expensive places, eat out at higher end restaurants, buy that designer watch, splurge on a spa package, etc. All sound too familiar? You get the idea.
What’s more? Earning a higher income is not efficient. Generally, a larger portion of your paycheck goes to paying taxes as your income increases. Taxes are one of the largest expenses for many Americans. If you’re surprised learning this, just look at how much taxes trim your paychecks and you would probably agree with me.
Earning Efficiency and Taxes
Assume for a moment that your marginal tax rate is 25% (not including state income tax). If your pay goes up by $400, you’d pay $100 in federal income tax. You’d pay an extra $24.80 in Social Security. You’d pay an extra $5.80 in Medicare. All you would see is an extra $269.40 from that $400. And that’s only true if you’re lucky enough to live in a state with no state income tax. If you’re self employed, you’d pay double into Social Security and Medicare, leaving you about $240.
However, if you find ways to cut your expenses by $400, you would get to keep all of it. Saving is 100% efficient. Earning is not nearly as efficient (unless you’re in the bottom quarter in terms of income). Earning more money usually involves working longer hours or working harder. Saving money takes work as well. It’s as much about discipline, attitude, commitment and adapting a certain mindset when thinking about money and savings.
Mindset: Keep What You Earn
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Personal finance advocates and articles like to say, “Pay yourself first”. A classic book titled, “The Richest Man in Babylon“, states “A part of what you earn is yours to keep”. Both messages are the same and they are all about adapting a certain mindset. There are many ways you can follow this mindset. You can put money into a savings account for specific goals. You can set up an emergency fund. You can pay down debt, which is still paying yourself as you are repaying for your past spending behaviors. The ultimate form of paying yourself first is saving for retirement.
The U.S. tax codes really want you to put money into retirement accounts. For instance, profit sharing plans (such as 401(k)) are tax deferred and Roth IRAs allow for investment gains that are never taxed. However, you only benefit from these tax advantages if you have the money to contribute to such accounts. And making a conscious choice and having the will power to set money aside to fund these tax deferred accounts requires you thinking about your future self.
A Margin Of Safety and The Freedom It Enables
Cultivate a mindset that looks out for your future self. Then, stick with it. After a few months of doing this, you’ll drive a wedge between your earnings and spending cycles. And this difference between your earnings and spending becomes your savings buffer. This is your margin of safety for when something unexpected or unfortunate happens. Remember, a part of what you earn is yours to keep. Continue doing what you have to do to widen the wedge. If you keep it up, soon your financial life will see a breathe of fresh air. Once that happens, financial stress will fade and life will be more free.
This mindset generates positive ripple effects throughout your financial life. You’ll start to find other areas where you can save even more money. You’ll feel less burdened by material stuff. The more you reduce your expenses, the more quickly your savings grows as your spread between income and spending widens. This leads to better negotiating power whenever you’re seeking another job, a promotion, or working with your employer for improved benefits.
Who do you think is in a position to negotiate more skillfully? A person in a precarious financial position living paycheck to paycheck or a person who has saved years worth of their expenses? The first has much to lose and the stress of negotiation is likely to weigh on their mind. The latter has far less to lose and can walk away and seek other and better offers. The first may have to take what they’re given. The latter has the freedom to search for a longer period of time.
You’re Ready to Get Started and I’m Here to Help
Are you ready to take the first steps toward getting yourself financially unstuck? I’m here for you and ready to assist. There is so much great information available on the internet. There have been many great books written on the topic of wealth building and personal finance. But it all starts with you and your desire. You must have a desire to change your mindset. A desire to learn through reading also really helps. Give yourself a high five for reading this far into my post!
If you’ve made some financial decisions in the past that you’re not proud of, then let go of that. Forgive yourself. Moving forward includes acknowledging your past, but not dwelling upon it. Learning from it, but not having your past fill your body and mind with toxic poisons.
Lastly, I don’t want you to place pressure on yourself to earn more (yet). I don’t want you to pressure yourself to make overnight and drastic changes in your spending. Allow yourself the time to process what it is that you spend money on that you truly value. This will help guide you in evaluating other areas in your spending where you can reclaim money for yourself. Slow and steady changes are more likely to be lasting changes within you. Allow these thoughts to wash over you and through you. Eventually, the mindset resonates within you and you’ll view yourself and your money differently. And your life will be simpler.
Love yourself. Love your money.
“A little voice inside my head said, “Don’t look back. You can never look back.”” – Don Henley lyrics; what an amazing writer and individual
“Simplify, simplify, simplify.” – Thoreau
“Übung macht den Meister.” – German proverb
Do you feel any different about yourself now after reading?
If you once felt you were financially stuck and have since gotten unstuck, please share it here. I’d love to hear the specifics of your situation.
Ready to get started getting unstuck? Describe your current situation and what you’re currently thinking. I’ll offer my thoughts towards developing an action plan.