Last week, after publishing my article on Rightsizing vs. Downsizing, a discussion came up while talking with friends at Happy Hour. I could tell from the direction of the conversation that even though everyone agreed that going debt free was a wonderful element of rightsizing and simple living, most felt it was out of reach for the average family. That was a great reminder that rightsizing isn’t just about the size of your house, your car, or your credit limit—instead, rightsizing touches every area of your life including (and maybe especially) your finances. In fact, once a person learns to manage their money—both expenses and income—rightsizing the other areas of life will come more easily. Down the line a person can eventually achieve the ultimate goal of rightsizing, which is to live a life that uniquely fits and brings the greatest amount of peace, contentment and joy to that individual and family.
The good news, or the bad news depending upon your perspective, is that there is no money formula for you to follow to rightsize your finances. No one, me included, can tell you how much you need to live a life that will bring you contentment, peace and joy. There are about a gazillion stories on the Internet from people around the world who get by on practically no income whatsoever, but who live amazing lives. On the other hand, there are plenty of other stories about people deeply in debt even with an income of $400,000+ per year. Rightsizing doesn’t judge, but it does ask us to be responsible for what we say we need, pay our way as we go, and be very clear about what we will (or won’t) do with our finances.
With that said, there are guidelines that might be helpful. A few expense strategies are:
- Live below your means. If you make a practice of spending less than what you actually have coming in, you’ll have extra money to save and spend should a special need arise. Unfortunately our culture teaches us to spend as much as we make as though that were a reward for working hard. The untold secret is how great it feels to know you can easily pay your bills and even have extra money available for expected surprises.
- Don’t spend money that you don’t have. The big one in this category is remembering that credit is not the same as money—it’s credit. Sure it might be fun to indulge yourself by spending money you don’t actually have on a splurge—but when debt is hanging over our heads and we find little way to repay it, it is very difficult to live a happy and stress free life. Many years ago Thom and I actually lived on our credit cards for a time and ended up with over $40,000 in debt. That obligation took years to pay off, and drained our lives of enthusiasm and peace of mind. The huge amount of interest we were required to pay each month just to make minimum payments was more than a mortgage payment. Debt sucks the life out of you and I’ve heard it said that every time you spend money you don’t have (on things like credit cards), or sign on the dotted line for a house or car you don’t actually need—you are shackling yourself to a ball and chain for the next __?__ number of years. The good news is that it is possible, with focus and discipline, to pay off the worst of your debt. Thom found a great example in this story about a young man who in two years hunkered down to pay off $26,500 in student loans. It wasn’t easy but he shows it is possible. See the story “here.”
- Sometimes it is better to rent than buy. Our culture is obsessed with owning things, so much so that many people find themselves shelling out the money to buy toys and other luxuries that they could (and probably should) rent. While it might be nice to tell everyone you own that second home in an exotic location, please consider what it will cost sitting there vacant when you aren’t using it. Or think about how many times you might actually use that motor home/camper/trailer/boat before you shell out the money to buy it! We don’t have to own things to enjoy them—sometimes renting or even sharing is a better solution.
- Be careful about thinking of your purchases as an “investment.” Investing for the future can be very profitable. Unfortunately far too many people purchase items and call them an investments rather than buying something that actually generates income. FYI…. cars, boats, time-shares, art and even a home are not investments—unless a purchase brings income into your household it is really just another expense—there is a difference and we should know that.
- Be very honest with yourself about what you really need to be happy. I was talking with a girlfriend recently (yes you know who you are!) and she told me that she didn’t’ have room in her large walk-in closet for all her clothes and shoes. When I suggested a good solution would be to give some away—she told me she already had given a lot away, but really needed everything else. Really? That same argument came up again recently with a family member who told us he really needed that expensive car with its payment of $700+ per month to impress clients. Really? Instead, if you are serious about the benefits of rightsizing your finances I suggest you honestly look at what you think you need and the excuses you tell yourself. As I’ve written about before, “Argue for your limitations and they are yours.” On the other hand, I’ve also written, “What you think about me is none of my business.” So if you need that house, that car, those clothes or whatever, and are willing to pay for the consequences of having them, then that is definitely your choice. The biggest problem I see buying extravagant things that we say we need is that psychological studies prove that very shortly after buying those items the pleasure we got diminishes rapidly. Plus, as I mentioned in the case of my girlfriend, owning that pleasure becomes an extra burden that must be handled. Everything we buy and then own carries a price and responsibility. But rather than analyze the cost and commitment, many people continue to tell themselves they need those items rather than admit they’ve been pursuing the wrong dream the entire time.
A few income strategies for rightsizing are:
- Avoid doing anything just for the money. While most people will righteously say they would never prostitute themselves, a huge number will take on jobs they dislike for no other reason than the money it brings them. As songwriter Jimmy Buffett sings, “There’s a fine line between Saturday night and Sunday morning.” Unfortunately, most of us don’t value our time, talents and creativity enough so we squander that for a few dollars just to buy stuff that we often don’t even need. Worse yet, we insist others we know and love (husbands, wives, children, etc.) do the same. On the other hand, rightsizing suggests that we focus our talents and passions on those things that hold value for others and ourselves. We then let go of making money the goal, and instead make work a gift we offer the world.
- Do what you love and the money will follow. During my life this principle has played itself out over and over. I became a writer not because I had any training or education in it, and certainly not because I thought it would generate a lot of income, but because it was something that I dreamed of doing. Want to know whether you love what you do? Just ask yourself if you would do it even if you won a $10 million lottery. If you aren’t working at something that makes your heart sing and feet jump out of bed in the morning then it might be time to look for something different. In the end everything has a price—including the jobs we work at. If we are just putting in time doing something we dislike—we might be making money but there is always additional cost to our activity. If we work at something we love—then the joy of that is bringing in far, far more than the money we deposit in the bank.
- The limits or caps on our income are there because we put them there. Many years ago Thom and I had a teacher named Dr. Tom Costa. Many of the people he taught were older and retired and I can clearly remember Dr. Tom telling those people, “The only one who ‘fixes’ your income is you.” Naturally, many of the audience would argue saying that they had to exist on a fixed social security check each month. At that, Dr. Tom reminded them that there was a huge abundant universe all around them and they were the ones who were choosing to live merely on their social security. From a spiritual perspective the concepts of “like attracts like”, “what you think about you bring about”, “it is done unto you as you believe” and many other statements suggest that we are the ones who decide how much we can accept and receive in our lives—financially and otherwise. Certainly during the first half of our married life, Thom and I found it very difficult to rise above the income levels of our family-of-origin. But by working on our consciousness and our ability to accept and receive, we have risen to an income level that is far beyond our previous expectations. Whether or not you believe in a spiritual aspect to income and intentionality is entirely your choice.
- Retirement is overrated. Most people who crave retirement are working at jobs they dislike or have grown tired of doing. Rather than take a chance and live a life of passion today, they delay it for a promise that may or may not ever arrive. Instead, if we pursue a job that brings us happiness, contentment and joy every single day then we don’t have to concern ourselves with how or when to retire. If we all focused on doing jobs we loved that produced help and service for others, then every day for the rest of our lives would be filled with meaning and purpose. Who would want to retire from that?
- Rightsizing our income is all about balance. Which would you rather be? A) A person who makes a good amount of money from work he/she enjoys and then shares it with those they love, along with plenty of downtime to relax, enjoy or create. Or, B) a person who make an enormous amount of money at a job that is highly stressful and requires long and grueling hours so that that there is little time to spend with those he/she loves and even less time to relax, enjoy or create. Of course, the choice isn’t usually that obvious and is seldom either/or. But my point is that everything comes at a responsibility or cost—be it time, energy or spiritual coin. We alone decide what works for us; and when we find a method that makes our heart sing and allows us to sleep well at night—then chances are good we have rightsized our income stream.
Keep in mind that rightsizing is finding a lifestyle that brings you the greatest amount of peace and happiness. What works for me might not work for anyone else. But in order to get clear each of us must spend time and reflection discovering it for ourselves—and then implementing it in our day-to-day life. While I believe my guidelines to be universal, there’s a chance that they barely touch on what needs to happen in your life to live your peaceful and happy existence. Beginning the conversation about what is important to you, what brings you joy, what stresses you out and what gives your life purpose, freedom and meaning, will all help point the way to rightsizing your finances. Is it worth it? Trust me—this is an investment that will prove worthy of your time.