This week I’m featuring guest posts from some of my best blogging friends while I take a small blogcation. Don’t run away – these are awesome posts from talented bloggers! Today’s post is from Bridget at Money After Graduation. She has recently adjusted her spending habits to live with a little, but is still seeking someone to proofread her blog post for times when she types “alot” instead of “a lot.”
(image source: hyperboleandahalf.com)
“A lot” is a relative term, it depends on a frame of reference for comparison. It is not to be confused with “Alot,” which is both a grammatical error I frequently make and the mythical beast pictured above.
What constitutes “a lot of money” depends on:
how much money you already have
how much money you need
your ability to reconcile your behaviour with basic math
Sometimes it’s easy to think you have a lot of money if you have a large amount saved or invested in assets. But the reality is that even if you own a million-dollar house, if your salary is only $20K you can’t live a million-dollar lifestyle.
It’s an even bigger problem if you are already trying to live a million-dollar lifestyle on a thousand- (or even hundred-) dollar income. However, there’s some forgiveness to be had here since cost of living is as much dictated by geography as your penchant for luxury goods. There’s a significant cost difference when you compare living in a small town to trying to claim some apartment space in an overcrowded city. Nevertheless, it’s easy to get swept up in what we “need” to buy even when we can’t afford it.
When it comes to debt, it’s easy to be accusatory and insist people were living beyond their means on purpose. But when some indebted people say “I just don’t know how this happened”, I kind of believe them. When people think they have or make more than they do, or when they don’t have a solid grasp of what’s an appropriate cost for a certain service or material good, they will spend accordingly.
From my own calculations, I only take home about 60% of my paycheque and the rest goes to things like income taxes, union dues and mandatory employer retirement plans. I did the math because I knew, deep down in my heart of hearts that I was spending like I made my gross income and not my net, and if I didn’t immediately change my behaviour, I was going to find myself in debt again and fast.
I think it’s pretty easy to think you make a lot of money, and much harder to actually make a lot of money.
So what can you do? Figure out how much you actually have and how much you actually make. This means taking stock of how much money is accessible to you, and how much is left over after other taxes and deductions from your regular pay. When it comes to finding how much you actually need, be realistic: you need a place to live, but you don’t need a 4,000 sq ft home with granite counter tops and an indoor pool. Keep track of what you spend and inform yourself so you can find the lowest price, especially on regular costs that can vary tremendously like car insurance or cellphone plans. Lastly, accept that when it comes to your income, you actually make less than you make. Figure out how much of your paycheque is actually yours after taxes and deductions, and adjust your behaviour to fit those numbers.
After all, it’s better to be happy with a little, then to spend your time trying to have Alot.