Have you ever thought about how much money you spend every month just trying to keep up with everyone else? Seriously, whether it is more house than you need or really can afford, a new ride, or the latest Apple toy that is released, do you know how much money you are burning through every month in these efforts? You should. You need to take a hard look at the facts, and for many people those facts include using credit cards to supplement their lifestyle, and keep up with those around them. It’s not a new concept, but it has amplified with Social Media being such a ubiquitous part of our world now.
Living beyond your means is a treatable disease of you catch it in the early stages. If you let it go on too long, it may prove to be (financially) fatal. You may laugh at the idea that you are headed towards bankruptcy, but let’s do some math and see how close you really are. Have you logged into Credit Karma or one of the other free sites that let you check your credit and TOTAL OUTSTANDING DEBT? And just to be clear, its not “outstanding”ly good, it is money you owe, debts that are unsatisfied. I am speaking from experience here; at one point my number at $70,000 of student loans, car payments and credit card debt. THAT’S NOT COUNTING MY MORTGAGE. Yikes…
The real question is….why? What is driving the behavior of buying things you can’t by definition afford? Do you think that rolling up in a cool car makes your friends think differently of you? Do you value the opinion of strangers enough to over-extend yourself financially just so you can get an occasional look at a stoplight? Stop financing your insecurities…if you lose friends over which shoes you wear, they weren’t your friends anyway.
Let’s take a look at this in a practical sense. Adjust the numbers as you need to from this example, but it will give you a good idea of the recommended breakdown of your monthly finances and how they should be allocated. According to Quicken.com the dollar figures in parentheses are based on our above example of a $35,000 gross salary with a monthly take-home pay of $2,110 per month after taxes and other deductions.
30% ($634) Housing
10% ($211) Utilities & other housing expenditures (including renters insurance)
15% ($317) Food (at home and away)
10% ($211) Transportation (including car loan)
10% ($211) Debt repayment (student loans and credit cards)
10% ($211) Saving
5% ($106) Clothing
5% ($106) Entertainment
5% ($106) Car insurance and miscellaneous personal expenses
These numbers are for one person, and I don’t know about you, but some of them seem a little low to me. If you did follow this to a tee, you’d only have $208 in your pocket at the of the month. Those $400 Yeezys or that new pair of Airpods that you “have to have” are killing you financially. Every time you slap down the plastic to pay for something that is outside your monthly budget, you dig the hole deeper. The cheap headphones play music too, you know….
Financial freedom isn’t more credit at your disposal, it is freedom from debt. If you want to really experience financial freedom, get out from under the pile of debt you have. Stop giving a crap about what other people think, and start focusing on rescuing yourself. If you are drowning in debt, you need to treat like it you are actually drowning. Pay your bills and allocate your monthly budget like your life depends on it. In some cases, it does to a degree. Imagine the set back it would be to file bankruptcy and have that on your credit report for the next ten years.
Better yet, imagine what it would be like to make the last payment on your house, and now you are completely debt free. Don’t contribute to Kanye’s retirement, start saving for yours.