Ah, the never ending debate. Does defense win games or is offense the thing that wins games? We have all seen those games when you see one team that has an unstoppable offense pitted against a team with an impenetrable defense. These games usually spark endless debates in living rooms and sports bars across the world.
I don’t know when I first started thinking about my finances this way if you think about it a lot of your finances are similar to this debate. As I have said before a lot of finance can be complicated but one aspect of my finances that I keep in mind is the mantra “reduce debt, increase income”.
When I think of my finances in terms of defense I think of reducing debt and reducing what I call “stupid spending”. When you think about it its pretty simple. The more you are paying someone else, the less you can pay yourself. 20% on an ongoing credit card balance, 5% on an auto loan, 10% on a personal loan, 7% on some student loans. Not only do all these payments add up but more importantly the interest you pay on these pile up. The interest you pay on these are going to pay some one else. Its hard to max out your IRA contributions when all of your money is going to someone else. Now when I think of what I call stupid spending I think of buying things I don’t need. The old story about how if you buy a TV you don’t need that is on sale from $1250 to $1000 you didn’t save $250, you spent $1000 that you didn’t have to. My thoughts on stupid spending is why I deal with the small inconvenience of packing my own lunch when I go to work or why I still haven’t bought that Salty Crew hat I want but don’t need.
When I think of my finance in terms of offense I think of the ways that I can increase my income. The more you are making, the more you have to save and invest. If you save 15% of your income to a 401k you are going to put a lot more in if you are making $75,000 a year than if you are making %60,000 a year. Now I know it can be hard to increase your income, but its not impossible. It never ceases to amaze me that in one breath an individual will complain that their paycheck is too small but in another breath they act repulsed at the idea of working a little overtime. I get it though, I recently went to working swing shifts at my job in order to get an extra dollar an hour in shift differential.
Now, both decreasing your spending and increasing your income are going to require some sacrifices and effort but I think in the long term these sacrifices are completely worth it. I will say that increasing your income and decreasing your spending work much better together than separate. A good example of this is the ESPN documentary “Broke”. We have all heard of the star athlete who makes millions in lucrative contracts but then turns around and buys a gold plated toilet or a tiger and a couple years later declares bankruptcy. What a surprise that spending a small fortune on a watch that tells time the same as a g-shock or that phone that’s already in your pocket could lead to financial ruin.
Just keep in mind that just because you are making $100,000 dollars a year does not mean that you have to live like you are making $100,000 dollars a year.
On a side note before I close this post out I just wanted to thank those of you that have subscribed and liked the page. I know this blog is still really small but its awesome to see one or two people subscribe with every post. Its been amazing to see people from other countries reading these posts as well (love my Canadian and UK readers). I have been thinking that if I get a big enough following that I may switch to video blogs on youtube though. If any of you have any thoughts on this please reach out to me and let me know your thoughts.
Fine Finance 