Why Do I Make More Money but Have Less Than Ever

I sat down with a couple a while back and they were frustrated over their life and finances. The husband made a comment that I hear often. 

I don’t understand how I make more money than ever but I have less than ever!” It took a while for this family to work through their challenge, but I’ll share what they decided to do at the end of the article to get 100% out of debt.

Recognizing Financial Issues

When someone comes and asks for help I never just help them out immediately. I want to help them recognize how they got into their current financial situation and have them work on a plan to get out of the situation and stay out

Debt can be an addiction just like any other addiction and it takes a lot of time, effort, and patience to work your way out. Empowering others to make smart decisions is far more helpful than handing folks a check to solve their problems. While a stack of cash solves the problem today it doesn’t help them tomorrow or the next day.

I can’t help anyone if they aren’t willing to share all their income and expenses. Often they are embarrassed or have never looked at them all together so it is an eye-opening experience. I am proud of anyone that asks for help and tell them that upfront. Who doesn’t need help at some point in their life?

The common question that I ask folks when they ask for some financial advice is:

“How much do you make?”

I write that number down and then ask,

“Does that seem like a lot of money to you?”

“Do you feel like you need to earn more?”

“How much money do you think you need to have?”

Just $10,000 More

As you probably know most folks think if they just earned a little bit more then they would be set. Just $10,000 more and everything would be great. But then I tell them that is probably one way to do it; however, don’t you make more than you have before and maybe thought at that time just a little bit more would help you out?

“Why are you in the same spot despite earning more money?”

Earning more isn’t the issue, it’s controlling the spending. That recognition is a big stepping point. Most of us know that the quickest solution to have more money is to decrease our spending and free up some of the money we already earn. You can ask for a raise or change your spending to have more money, one is a little easier than the other and you control the outcome.

Some folks are shocked that they earn more money than me, but have hundreds of thousands less because they have spent it all or have so much debt that they never get positive because of their obligations. But that isn’t impossible to correct.

Admitting that you need help is a giant step forward. Why not ask for help and seek advice from others who have been able to accumulate some wealth no matter what their income maybe?

Show Me The Lack of Money

Okay so we have all your papers and obligations and we are sitting down together. Hooray! Some folks don’t file anything away or track expenses so it’s hard to make progress. I’ll be honest I am more concerned about expenses than income. What I look for:

  • Reoccurring payments (home, phone, car, TV, big toys, credit cards, etc.)
  • Food expenses (how much do you eat out: work and family, grocery budget)
  • Debt expenses (college, school, business..etc)

Really the list can go on forever. Once those are all written down and we put them on paper I will hand the list over along with the total and just give them some time to look it over. Again it is usually the first time they have ever seen all their expenses at once. When everything is $75 here, $59 here, $179 here it doesn’t seem that much, but put it all together and the number looks much different.

“Is there anything that surprises you on here?”

A common response is,

“I can’t believe how much we are spending.”

More common is,

“Holy ****”

This is the Worst it Will Be and Give Hope

So at this point, we don’t want to dwell on the problem we want to work on a solution. I tell them if they are truly willing to change a few things that this will be the worst it will be because from today on they will be in charge of their money instead of money being in charge of them. 

You have to be positive and give hope. There is a light at the end of the debt and expense tunnel. I also tell them that no matter what they earn as long as their expenses are under control they can get out of their problem. Financial understanding gives a lot of hope.

I point out that there are numerous ways in my opinion what they could cut out to save money. Often I say that you aren’t even saving $1 a day at this point. If you accumulate debt over your monthly income you really aren’t even saving $1 a day. So let’s work on a small goal and build up.

While I can point stuff out, it is more important for a couple or a person to find areas. Sustained success needs to be accomplished by the person in debt. What I think can be cut is often not what someone else thinks. Giving up a smartphone is almost impossible for some folks.

“My husband doesn’t need his!”

“What are you talking about, yes I do, I need it for work!”

If it gets a little heated I will draw up some suggestions of what I think could be done. I will let them think about it a little bit more while I work on a plan.

What About Spending Less On…..

What if instead of $99 on cable, you went to Sling TV for $21 a month?

What if instead of eating out twice a week you did it once a week as a family and that would save $120 a month?

What if you sell a 4-wheeler or motorcycle? (I’ve had people walk out on me on that suggestion).

Again this list can go on and on. I usually suggest just trying one thing out instead of going “cold turkey” because too drastic of a jump usually leads to immediate failure. There are always bumps along the way, but baby steps are better. No one wakes up and says “I’m running a marathon today” and does well. You start with a mile and increase over time.

“What is one change we can make today?”

With some success, it will lead to more action, but there has to be a recognizable success at first. Often when they see accounts starting to go in the right direction and they will get excited and take off from there. Others need some extra help, not one situation has ever been equal to another when helping folks out.

What to do With the Extra Money

I guess it isn’t extra money if you are in debt, but at least you aren’t giving it away to someone else or some credit card company. Sometimes it is really hard to hold on to the extra cash because they have never had extra before. It’s exciting to have cash on hand and it can easily be spent.

That is why we set a goal and usually, we try to build an emergency fund or what I call a life fund. Let’s get $500 and put it somewhere that never gets touched. Once that is done and we see a pattern of success let’s try to see if we can do something else and start to pay down debt.

Whatever it is I want them to make the decision. 

They have to start making smart money decisions on their own and from that point forward. I will give some guidance but ultimately it needs to be their decision at the end of the day.

We are Paying Off All our Debt Today!

So back to the first family that came in and realized that they were making more money than ever and had less than ever. Their main issue was too much house (I told them they would likely be house poor for 30 years) and too much debt from school. 

They had their dream house just out of school with a lot of college debt and now mortgage debt and starting a family there was no way out unless they increased their income. They had paired back their other expenses so unless they had a new job or another job this was going to be their future.

They thought about it and tried a few different things by changing their vehicles and it still didn’t get them where they wanted to be. About a year later I saw their house for sale. They decided they would move out and buy a townhouse. If they sold their house they could also pay off all their school debt. The townhouse mortgage would be low enough for them to save a couple of hundred dollars each month and then in a few years, they could look at buying a house.

They were so proud of their decision. I didn’t recommend that and was actually a little surprised by their move. I’ve told a few folks they would be house poor and two families actually moved out and have seen others take on second jobs and others that have gotten divorced because the stress eventually took the family down.

I have run into both families that have moved to lower their housing costs and you could instantly see a difference in the families. They were happy and both said how relieved they were because their life isn’t ruled by stress and finances. They have peace of mind which is worth more than the accumulation of stuff.

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