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Are You Letting Expenses Rise to Meet Income?

By MARY ELLEN KALUZA

I once heard the phrase: Expenses rise to meet income. “Not me!” I thought. But, to be honest, even a pathologically frugal person like me lets expenses rise with income.

Case in point: For most of my life (we”™re talking quite a few decades) I watched broadcast television and library videos on hand-me-down TVs. Cable was not in the budget as a single parent.

After my nest emptied and I had only myself to support, I envied friends and the great stuff they were watching on internet streaming sites. So, I started to pay for streaming. But, because my TV was so old and dated, I had to move off the couch in the living room to a hard chair in front of the computer screen to watch streaming video. I was okay with that, but my cat was not. We had a lot of disagreements about what was comfortable and what wasn”™t.

So I finally paid money for a new TV for the first time in my life. (Don”™t worry – I didn”™t completely go off the rails; it is a modest TV). We were back on the couch for TV time, and harmony was restored to the household. But, of course, that meant I needed to buy other devices, like a digital antenna and some box to get the internet to my TV. More expenses.

I could argue all this spending was justified to keep the cat happy, which makes my life easier. But the truth is, I didn”™t need to pay for entertainment in the first place. There is still plenty to watch on broadcast TV, and my library is only two blocks away.

Why wouldn”™t you want to let expenses rise to meet income?

  1. Retirement. I have a cousin who always put her pay raises into her retirement account instead of spending it. Because of her diligence, she retired early with her husband and they are enjoying life very much.
  2. Unforeseen events. Nearly 70% of Americans have less than $1000 in savings. Almost a quarter don”™t even have a savings account. It doesn”™t take much of an emergency to put a family into a financial tailspin. Instead of getting the latest and greatest smartphone (and the attendant increased monthly expense) with that raise, put it into an emergency savings account. Money in the bank is quite comforting.
  3. Reduced income. Keeping monthly expenses to a minimum will make it so much easier to weather a reduction in income from a layoff, divorce, or disability. Not being tied to expensive phone contracts or that new car payment will make adjusting to less income so much easier.

I”™m not suggesting we always have to deny our wants. Just think through taking on that new expense before you are locked in to it:

  • Review your retirement and/or emergency savings: Are they sufficient?
  • Ask yourself how necessary the expense is: Can a cheaper car suffice? Does everyone in the family need a new phone? How many streaming or gaming services can you realistically use?
  • Remind yourself how marketing and advertising manipulates us into spending our hard-earned money on unnecessary stuff.

Save that new money! I guarantee you”™ll thank yourself someday.

Mary Ellen Kaluza is a Certified Financial Counselor with LSS Financial Counseling which offers free counseling for budgeting, debt, credit, student loans, and housing. Website: www.lssfinancialcounseling.org. Call: 888-577-2227.

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