Red Light Green Light
Did you know that a (Nielsen, 2015) study stated almost 70% of Americans live “paycheck to paycheck” and over 30% can’t afford a $1,000 emergency.
This. Breaks. My. Heart.
In the last 2 weeks now, we have been kicked in the teeth by a virus that caught most everyone completely off-guard. I’m not here to debate (with myself) on how or why this happened... but rather, what can be done. When reality sets in, I want us to ask ourselves a few questions:
- What can I control?
- What can I not control?
- What am I seeking to control, that I need to stop trying to?
We have zero say in a $2 trillion stimulus package. We have zero control over how many New Yorkers are infected with the Covid-19 virus. I know I can’t do anything about our Governor in WA’s “Stay at Home” Mandate.
I do have control in how I respond as the leader of my family. I choose how I spend my free time; reading a book or watching the news (Good stuff in, good stuff out). I am in control of how I approach my workload. And lastly, we are in control of how we immediately make cuts to our personal and business budget... which brings me to the point of this blog post:
(Drum roll) I give to you the Red-Light — Green Light Bank Statement Exercise
Time for a Homeslice moment of honesty - when times are good, we tend to run through our cash like a 16 year old driving a yellow Lamborghini. We run stop signs and almost hit little old ladies just to get to a coffee stand! The reality is, we need to be paying attention to those stop signs and sweet senior citizens because the economy gives signs, we’re just too ignorant to look for them when we’re in the “Good ol’ Days”
My challenge to you is to print your last 2 months of personal (and business if applicable) bank statements. Gulp. And see how you can cut 20% if your expenses. If your total outgoing bills are $7,000 per month, it’s time to cut $1,400 out somewhere, #TrimTheFat
Get out 2 highlighters and start at the top —
You’ll use Red (or orange, maybe?) to highlight UNNECESSARY expenses. Unnecessary expenses might be cutting back on those coffee runs (For example, we committed to 3 per week, down from 6 or 7). Amazon, anyone?! how about those Auto-renewing memberships that keep slipping by unknown? Dare I say, Target? Do you need to hide or simply delete that Uber Eats or DoorDash app?! Some others you may not be thinking of is cutting your auto insurance in certain areas, like your premiums if you’re a good driver. Maybe you can bundle your home and auto? Maybe it’s time to switch phone carriers or ask for a discount, and the same with your TV provider? We cut our cable setup from $180 per month down to $110 per month and kept the same internet speed. Pay attention to the difference between cutting and reducing… what can you really commit to? We committed to leaving an Amazon purchase in the Cart for 24 hours and if we still want or need it, we’ll order it the next day!
Subsequently, the green highlighter needs to be used to for NECESSARY purchases or bills in your life. This is usually the mortgage, rent, utilities, groceries, maybe child care, etc. The part where Mindy wanted to high five my face is when I repeatedly asked, “is this really necessary?” I’d like to point out here not to be a drill sergeant, this is about realistically dialing back in the times of unknown. If you want to “check your work”, you can see if the green highlighted expenses really match what your budget spreadsheet has for monthly spend.
Our goal is to create a new habit where we do this exercise 2-4 times per year. We were a bit surprised at how laxed we’ve become in a really good economy. Most of you know our income is flexible based on the number of people we help buy and sell homes. This has taught us to be really conscious of our outgoing bills and spending but it also lets bad habits form quickly when we have a good stretch of monthly income.
2% of you will actually go do this exercise, and I would bet those 2% will be able to make strides when the markets bottom out and opportunities come… will you?