The Don't Cut Spending Budget
John: Do you think you might have a budgetary issue? Find out why not cutting back on your spending might be the best decision that you can make.
Hi, I'm John Scherer and I run a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: And I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.
John, a lot of times when people think they have to cut back their spending, they're not looking at the big picture. And I remember when I started in financial planning, I was listening to Burt Whitehead. And he said it's a lot easier to make an extra $1000 than it is to cut your spending by $1,000. And that always stuck with me. And I didn't know if it was true or not.
And certainly most of the people in the financial planning industry are just trying to… I think there's an impression that people are trying to get you to cut your spending and save more.
John: Spend less and save more. That's the message. Right?
Bridget: Right. And I would say that what I've found to be true with myself and with clients is that there can be a lot of success with trying to earn more. And the underlying issue there is trying to add more value to more people's lives. So that is what I would say. I would say, why not focus on the other part of this equation, on the earning part, and optimize that versus the spending part. What are your thoughts, John?
John: This is such a great topic, and when you brought this up and said, “Hey, Let's talk about this today,” Bridget, I thought, “What a great place!” Because nobody in our world… it's all about what you just described.
John: Let's figure out your budget. And how can you spend less? Or, geez, I feel constrained. And how do we manage? And as I think about it, there's two parts to this equation, right? There's, the spending. But then there's the earning.
John: It's such a great way to look at it. And I was trying to think, how does it relate? And I thought about dieting and weight, personal and things like this where it's pretty common. People think, “Well, geez, if I work out more or I eat less… I work out more and eat less. Here's my two inputs.” And those are the things that you read about in articles, and that's the messaging that's out there. And you say, “Oh, that's really intuitive.”
And then when we think about this idea of, “Hey, I'd like more… I'd like to improve my financial, my cash flow in some fashion.” All we ever think about really is spending less. And the fact is there's two sides to that equation. There's that input side, too. What do we do about making more money?
And I think it's such a great thing that is really meaningful. It's not just about the investment side, it's the whole picture. And one of the things I just wanted to ask -- you've done a lot of research and you know more about this side than I do -- is what about folks, where it's a limiting mentality in some fashion? If you say “Listen, I can go and find different jobs,” and we talked just a little bit.
What about if I'm just a regular employee, though? I go to work. I'm a teacher. I work for a big company. How does that apply? It seems so it's so much different than somebody who runs their own business. But how do you help people think through that?
Bridget: Well, I think everybody inside them has both the abundance mindset and the scarcity mindset, and we turn them on and off at different times. And so sometimes with earnings, we can get into a scarcity mindset and be thinking, “I can't earn more.” But most people that I know, it's just like you got to kind of think about the problem, and it might not… How to earn more might not present itself on a silver platter, but that doesn't mean that you can't figure out how to do it.
So one person I heard about, for instance, was a calligrapher, and she's like, you know, I earn what I can earn from calligraphy. I guess if I wanted to earn more, like a lot more, I’d need to be a famous calligrapher who had written a book. Okay. So she started working on writing a book.
And like other people I know, for instance, one teacher I knew, she didn't care about money that much, but her spouse was quite frustrated because she had gotten a master's degree, but didn't go through the hoops required to get paid more. Because you had to submit it, and prove...
Obviously, again, it's not necessarily a silver platter to make more money. You have to work at it a little bit. You might be for training. If you're constantly getting a little bit more training, there's ways to do it, but it's not necessarily the most obvious.
John: That teacher example, I think that's it's really interesting that it's not always laid out on a silver platter, but there might be some low hanging fruit.
John: Are you looking at the opportunities that are there, sort of the diamonds that are in your backyard sort of thing?
John: Maybe there aren't any. But I wonder how many people don't even consider that. You feel like you're stuck in the position that you're in without looking at that.
Bridget: Yeah. These days, all the kids are talking about the “side hustle,” which just means having an extra business. And I know people with side hustles that probably don't think of them as side hustles. So it's just like have something on the side that you're working on that might or might not work out that makes some money.
John: Yeah. It's interesting with the teacher example. It's a job that has some flexibility and time, perhaps around breaks and things, maybe for a side hustle. But even for that, that means working more.
And if you don't want to work more, maybe there's other places. Can you run a consulting business and you do private teaching and you can say, “I want to be a teacher, but there's limits as to what I can do salary-wise.” Well, there's other places. Does it have to be in the position in the teaching like we think of it? What other ways are there, and especially with technology these days, maybe some interesting opportunities.
John: And I think this might be a good way to circle back. I think the one takeaway that I have from this conversation -- I appreciate you so much bringing this up -- is just that there's more than one side to this discussion.
John: If you feel like, “Golly, I spend too much,” or “I don't have enough.” Yeah. You can take a look at your spending, and that might be the right place. Maybe there are some places that are really easy to cut back.
But make sure you consider… maybe you're doing all the things, but if you don't think about it, maybe it's like your teacher friend, there's literally money on the table that you're not taking advantage of, or a different way to do the same thing. And it's such a big input. I think that's really huge.
Bridget: Yes, exactly. You don't have to accept the earnings that you have now. But in order to make more, for most people, you have to do a shift, a little bit of a shift in mindset, and it's in you. You’ve got it.
Bridget: You have that mindset in you, too. You use it at times. But you just have to make the shift over. “Okay. If everything was great…”
And to talk about some of our previous episodes, that's one of the reasons why we, as financial planners, talk about some of the things that we talk about, to try to help people shift into an abundance mindset. So we talk about “What would you do if you had five years to live?” We talk about “What would you do if you want the lottery again?” Again, it's to try to help people shift, to move their mindset.
So I think with that, let's wrap it up. Again, my name is Bridget Sullivan Mermel. And this is John Scherer, also. We’re Friends Talk Financial Planning. And we're both members of the ACP network, or the Alliance of Comprehensive Planners. For more information on that, you can check acplanners.org.
John: That's right.
Bridget: And, John, you talk about subscribing.
John: Yeah. Good. That's the one thing I always forget to say. If you like what you hear her, click on that subscribe button. That helps other people find us so we can get this message out. So thanks, Bridget. Until next time.
Bridget: Thanks, John.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.