Sense & Centsibility Blog

Do You Let Your Expenses Rise to Meet Your Income?

A while back at our Financial Counselor meeting, I heard the phrase, “Expenses rise to meet income.” My first reaction was, “Well, they don’t have to.” And next, “I don’t do that.” The phrase stuck with me and I thought about it more. I had to be honest with myself—even a pathologically frugal person like me lets expenses rise with my income.

Case in point

For most of my life I lived with broadcast television and library videos watched on hand-me-down TVs. Five - six years or so ago I got envious of my friends talking about the great stuff they were watching on internet streaming sites. So, I started to pay for streaming. But, because I only had a pre-war TV, I had to move off the couch in the living room to a hard chair in front of the computer screen to watch television. I was okay with that, but my cat was not. It led to a lot of disagreements about what was comfortable and what wasn’t.

So 2 years ago I paid money for a new TV for the first time in my life. We were back on the couch for TV time, and harmony was restored to the household. But, of course, that meant I needed a number of other devices, like a digital antenna and some box to get the internet to my TV. More expenses. Now, I could argue it was justified to keep the cat happy, which makes my life easier, but I didn’t need to pay for entertainment. There is plenty to watch on broadcast TV, and my library is only 2 blocks away.

Why wouldn’t you want to let expenses rise to meet income?

  1. To save for the future. I have a cousin who always put her raises into her retirement account. Because of her diligence, she was able to retire early with her husband and they are enjoying life very much—still young and able enough to travel a lot, visit grandchildren around the country, and be quite comfortable.
  2. To manage unforeseen events. An estimated 62% 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 (new brakes on the car or a furnace repair in January) to put a family into a financial tailspin. Instead of getting the latest and greatest smart phone with that raise and the attendant increased monthly expense, put it into an emergency savings account. Financial counselors cannot stress enough the critical importance of emergency savings—we see the consequences daily of not having a savings cushion.
  3. Job loss or other reduced income. Keeping monthly expenses to a minimum will make it so much easier to weather a reduction in income, which can come in many forms – temporary layoff, reduced hours, disability, divorce, etc. Not being tied to expensive cable contracts, that new car payment, or a bigger mortgage payment will make adjusting to the reduced income so much easier.

Of course, I’m not suggesting we all have to live like we’re in the Dust Bowl. Just be mindful of taking on that new expense. Don’t rush into it.

piggy bank

  • Review your retirement and emergency savings: Is your savings sufficient?
  • Ask yourself how necessary the expense is: Can a cheaper car suit your needs? Does everyone in the family need their own private space in a bigger house? Is the premium cable package really worth it?
  • It is useful to remind ourselves, too, how manipulated we are by marketing to spend our hard-earned money on unnecessary stuff. I’ve heard we get 5000 messages a day to buy something. That’s a lot of pressure.

So, BE STRONG! RESIST TEMPTATION! It is guaranteed you’ll thank yourself someday.

If you are looking for more hands-on help to get your finances back on track or pay off your debt, click to GET STARTED on your online session. If you'd rather do a phone or in-person session, call us at 888.577.2227.

Author Mary Ellen Kaluza is a Certified Financial Counselor with LSS Financial Counseling and specializes in budget, credit, debt counseling and frugality.