1. Trim the Fat

Some finance people refer to this as playing defense, but it works. Dave Ramsey preached playing not to lose… avoiding stupid tax and all that. (Read The Total Money Makeover.)

The truth is that most budgets have room for retirement savings when our needs take focus over our wants. This process advocates for clearing the luxury items (e.g., Netflix, Hulu, Apple One, etc.) from the expense section of the monthly budget.

With interest rates still low, refinancing the home may still be a way to improve cash flow. But don’t do it if the extra cash flow will be spent only on wants.

6/21/22 UPDATE: Rates on the way up! This may dissuade people from buying a home, but it shouldn’t. Home prices are not likely to fall as demand still exceeds supply. If rates drop again in the future, then refinance.

2. Get a Bigger Shovel

Playing offense is how educators like Robert Kiyosaki (Read Rich Dad Poor Dad) differ from the stark black-and-white of Dave Ramsey’s Baby Steps. For sure, the Baby Steps work, but some people have cut all they can cut from their budget. The issue can also be on the income section of the budget.

This can be as simple as doing some overtime, taking on a second job part-time, or even starting a side hustle. Read Side Hustle by Chris Guillebeau.) If you’re like me – an everyday middle class wage earner – the fact that you can do something different for more money may seem foreign. It did for me.

A second job doesn’t replace income; it supplements your main source of income. Dave Ramsey says to deliver pizza and throw newspapers for a short period of time. However, as Chris Guillebeau writes, a good side hustle idea may eventually replace your primary source of income.

3. Combo Platter

This is the area I have been studying lately. The Baby Steps are a simple effective plan, but for some people it feels too stark. While I understand the Rich Dad philosophy, I’m too conservative (i.e., scared) to borrow large sums of money to purchase real estate. Leverage can be risky and I’m too close to retirement.

Ramit Sethi to the rescue. Despite the cheesy name, I have read I Will Teach You To Be Rich many times. The author, Ramit Sethi, seems to strike a balance between the “beans-and-rice/rice-and-beans” approach to finances and the “use other people’s money” to buy assets and avoid taxes approach. Both can work.

Sethi advocates spending lavishly on the things that are important to us is okay as long as we cut mercilessly on the things that are not.

The only possible problem comes when individuals aren’t really sure what’s important to them. Like a teen with a new mobile phone, some adults have short attentions spans. It’s hard to determine what Ramit Sethi calls our money dials if we’re not mindful.

If nothing is important, scarce resources may get squandered on everything and anything. Then Visa and Mastercard catch the slack. At upwards of 20% to 30%, that’s a big ouchie!

Conclusion

While any of these three tactics can work, personal finance is really a voyage of self discovery. As the path unfolds before us, we learn what is in our “DNA.” And what’s in our DNA just might be the simplest path forward for us. It’s important to play your own game and not conflate it with someone else’s game.

As Always…

Thanks for reading! I hope this information provides food for thought. Remember that I am not a certified financial planner, a certified public accountant, a licensed real estate agent, etc. My content is for educational purposes. I am a math educator who happens to have a finance degree. Like they say, never take financial advice from a math teacher! (Do they really say that?)

But you should spend less than you earn, invest the difference, and stay out of debt!

I would so appreciate your sharing my content with anyone you feel could benefit. And if you would like a free exploratory conversation or just want to shoot the breeze about personal finances, call me and leave a message or send a text to 570-731-0425.