Despite the ever present background noise of wailing and gnashing of pundit teeth, hair shirts ripping, and the guttural sobbing of the Can’t Even Generation, I have a pretty solid outlook on 2017.
The main reason is that Mrs. Lott and I have lived like frugal Scrooges over the past 18 months and have managed to eliminate all of our debt (minus the mortgage) and dramatically reduce our expenses. We are going to be fucked like everyone else if The Donald nukes something, but we are becoming more insulated than ever against cyclical economic downturns.
I mention this not to brag, we have quite a while to go before I take pictures holding stacks of money like a phone, but because it’s possible for anyone. It’s not always easy, but it’s simple: spend less than you make.
Start with a monthly budget. There are apps and things that help (I like Every Dollar), but all you really need is a piece of paper and a pen. Write down everything you spend. Every single dollar that goes to coffee or pastries counts. Your student loan counts. This is a tool, not a way to make yourself feel bad. The more honest you are with yourself, the better this tool works.
Once you have your budget, write down your income. This is the actual after-tax money that you have in a bank account or tucked under your mattress. Subtract this number from your budget.
If the number is negative or smaller than you hoped, you have to reduce your spending, increase your income, or both. It’s easier for me to reduce my spending at this point than increase my income, so that’s what I’ve been concentrating on.
Some expenses, like morning coffee on the way to work, were easy to trim. That one saved me like $80 a month. Others, like canceling my gym membership for a few months, were much harder. A lifestyle change I’ve adopted that many people could probably pull off is not having a vehicle. We’re a one vehicle home and the savings on that is enormous. Cable is another one that bleeds people dry. I had a bad habit of impulse buying books on Amazon. With very few exceptions, everything I want is available through a library or a friend. Plus I still own dozens of books I still haven’t read.
The vehicle thing is a major lifestyle change, but easily the one that’s saved me the most money. Any average consumer reports site will put the cost of owning a car at around $500 a month, including gas and normal expenses. My last motorcycle probably cost me about the same if you factor in the monthly payment, insurance, gas, tires, and repairs.
By adjusting my spending and lifestyle, I managed to bring my expenses down by about $700 a month. Not bad. I certainly miss the ritual of my morning coffee and the thrill of the open road, but financial security brings its own satisfaction. Plus, I’ve discovered how much I like riding my bicycle around. I imagine most people will find similar savings if they look hard enough.
You should always be looking for ways to increase your earning potential, though. Even if you like your job, you should be thinking about increasing your income because eventually inflation will put you behind.
The best way to increase your earning potential is to make yourself more useful. Improve your skills, learn new ones, stay ahead of the curve. This is my focus for 2017. I think I’m a very good copywriter, but there are other avenues for making money writing I should be exploring for extra income. I’ll write more about that in the future.
Something to note: the first time you do a real budget, it can be emotional. When Mrs. Lott and I did our first one together, there was fighting and bad vibes a plenty. We were essentially in the red $200 a month, which meant we were slipping behind, even though we were working more than ever before.
It gets easier. Just do it.