The Empty Wallet. Ground $0. A phenomenon also known as “living pay cheque to pay cheque.” We have all been there. Some of us started there but haven’t been back in a long time. Some of us have never left the empty wallet situation. Many of us manage to escape it, only to fall back into it again.
A new wrinkle to the empty wallet syndrome is the cash advance joints that seem to be everywhere. They could be called empty wallet accelerator stores. Are there really that many customers to support all of them? It is a shame that so many people want to spend their money even before they get it. And will also pay lofty fees to do so.
How can we escape the burden of the empty wallet? Wait for a raise and assume that the extra income will stick around? Not likely. If you are in the grips of the empty wallet, you will surely find it easy to stay there even if you increase your income.
Strangely enough, the cure is actually quite simple. It’s not brain surgery. It’s not modern technology. It’s not even two jobs. No, the prescription needed to cure the empty wallet disease is – a BUDGET.
Yes, a simple, straightforward budget can help you escape the empty wallet. No, it’s not as easy as it sounds.
If you can make a budget that is within your means, you will be well on the way to escaping the vice-like grip of the empty wallet. When you really look at your spending habits, you will find where you can make adjustments to reduce wasteful spending.
There are three parts to making a successful monthly budget:
Income – salaries, freelance income, rental income, etc.
Fixed Expenses – anything you must pay every month – rent, bills, groceries, etc.
Discretionary Spending – entertainment, clothing, healthcare, etc.
Income is usually pretty straightforward but for some, such as real estate agents or seasonal workers, a little extra work is involved. You must find an average number to use and bank those extra earnings in high season to offset the low season.
Fixed Expenses require a little discipline. Some people will put things like debt repayment or retirement savings in the Discretionary Expenses column. This is a big mistake! Debt repayment and savings have to be fixed expenses. If you don’t include them in the Fixed Expenses column, how likely are you to put extra funds toward these important components if you don’t have to?
DO THE MATH
Hopefully, at this point you can subtract the Fixed Expenses total from the Income total and end up with a positive number. If not, you need to take a hard look at your fixed expenses and make some tough, but necessary, cuts. Let’s assume you have a positive number and move on to everyone’s favourite category.
Discretionary Spending includes clothing, vacations, entertainment, Timmies, etc. Some people will consider some of these items Fixed Expenses but they are not. If you can’t afford it, you can’t have it! Your job is to allocate the funds that are left for this category to each item you put on the list. Again, discipline plays a big part in your success in this area. Do not exceed your budgeted amounts.
This is also the part of the budget that can cure the empty wallet. One less movie a month, one less cup of coffee a day, an extra 2 weeks between manicures (easy for me to say, I’m a guy). These are all ways you can save on your Discretionary Spending.
At the end of the day, it simply comes down to not spending more than you earn. A budget can open your eyes to many opportunities to make better use of your income.
What would happen if you walked into work tomorrow and your boss told you that the entire staff will be taking a 10% reduction in salary due to lower company earnings? Would you quit? In this economy, that’s not likely. No, you would carry on and make the necessary lifestyle changes to get by.
A well planned budget is not as harsh as this example, but just as effective. “Pay yourself first” is one of the oldest yet wisest strategies for saving money. Take 10% (okay, maybe just 5% to start) off your income before you work out your budget. You can do it! You would do it if you had to, right? Start an investment strategy to build your wealth. A Totally Freaking Super Account (a.k.a. Tax-Free Savings Account) would be a good place to start.
You work hard for your money. Let it work hard for you. Armed with a budget you can cure the empty wallet syndrome and start paving the way to financial freedom.