As many of you have probably already heard, money doesn’t always buy happiness (some studies say the correlation between money and happiness stops being significant after $70,000 a year). But let’s be real, if you have ever lived paycheck to paycheck, like we have, you definitely know lack of money sure can cause… the relentless weight of not having enough. While money is not a cure in itself for all of the challenges we face in life, our experiences and observations have shown us that healthy management of your money, AKA finances, can contribute to incredible relief, satisfaction, and overall happiness.
The thing is, simple money management applies to people of all walks of life. We have met many who make six-figure-plus salaries, live in big houses, drive new cars, have all of the latest gadgets, and still stress out about money and feel they don’t have enough. We have met people who don’t have anything new, big, or fancy, and feel like they have enough to share. Just because a person has a lot, or frequently spends money, it does not mean they are rolling with a healthy financial situation.
StaySmilinLife is about understanding how the choices you make impact your happiness, for better or for worse. So here’s the deal: we believe that if you can truly understand, internalize, and use the following two concepts, you will increase your ability to improve the relationship you have with money and enable yourself the opportunity to save and invest down the road. What concepts are we talking about?
- Income vs. Expenses
- Wants vs. Needs
Yes, we went there. Before you blow this off, hang with us. We fully understand that money can be made much more complicated when you include investing, assets, good/bad debts, and all the various ways in which you can use money to make money. We will get into all of that in other blogs. However, to start, we want to help spread an understanding of how getting a hold of these two basic principles can positively impact your happiness.
Alright, now for the bare-bone basics:
Income vs Expenses
Income = the money you bring in, however you bring in money – no judgments here.
Expenses = the money you spend, on anything – uh-huh, still no judgments.
When your income is more than your expenses (you make more than you spend), you are living within your means (within your budget), and this can have a positive impact on your happiness.
When your expenses exceed your income (you spend more than you bring in), you are not in a healthy financial position, and this can lead to debt and unhappiness, to say the least. The constant weight of an unhealthy financial situation, not having enough to pay for how you live your life, and bad debt, can have all sorts of negative impacts on your life, such as stress, frustration, anger, sadness… and all those other painful feelings you have felt.
Bottom line: whatever your lifestyle is, make sure you at least make a dollar more than you spend at the end of each month. Of course, if you literally only save a dollar each month you’re still going to be stressed out, but there’s hope. If you aren’t there yet, this needs to be your first goal. How do you do that? Well, that’s where the second concept comes in…
Wants vs Needs
Not all expenses are created equal – very generally speaking, expenses come in two forms: wants and needs. We know you probably just thought, “I know the difference between a want and a need!” The thing is, just because you know the difference, do you really know the difference? How aware are you of your spending habits and how much you are spending on your wants vs your needs? We live in a country and society which constantly bombards you with advertisements for things and experiences that will separate your money from your pocket. Billions of dollars are spent on marketing to entice you to buy things on a daily, if not hourly basis. So much so that it becomes easy to believe you need whatever it is you’re spending your money on, instead of the more likely truth, which is that you are actually spending money on wants.
NEEDS are expenses that you need to have to survive. This includes things such as basic housing, food, some clothing, a phone, and some form of transportation. Now, this is not to be confused with a large beachfront property, nightly lobster dinners, luxury clothing, countless accessories, the newest phone every year, and a $60,000 two-seater sports car. Needs are the minimum, or slightly above, of what you need to get by. Needs do one of two things: enable you to be alive, and hopefully healthy, or needs are directly tied to you making money.
WANTS are things that are luxuries such as movies, manicures, eating out and Moscow mules. Wants do not make you money, and without them you wouldn’t die. Most people think their monthly music or tv subscriptions are needs, but they aren’t, they are wants (again, unless you use them to make money somehow). We understand we all have different standards, but we are asking you to reflect on how your standard of living impacts your happiness, truly, including: What do you have to do to meet your standard of living? What are you really sacrificing to sustain your standard of living? Who have you sacrificed along the way? If you’re cool with what you have given up, are giving up, and will continue to give up, and you’re saving money… good for you =)
For most people we’ve ever met, herein lies the challenge: is your standard of living causing you to work at a job you don’t like and causes you stress, just so you can have a bunch of wants that likely bring only momentary joy and not true happiness? Do you live to work, or do you work to live?
We at StaySmilinLife have all struggled with these two basic concepts, and here’s what we have to say about it:
Carlos’ Thinky Thinky… I lived on $857 a month for a year as an AmeriCorps volunteer, in San Diego, CA. After paying $600 rent, needless to say, I was forced to learn the difference between wants vs needs, and boy did I learn how to be resourceful. Somehow I was able to keep my credit card debt to $2,000 by the end of the year, which I was cool with because I knew I had a higher paying job lined up. However, I didn’t learn how to successfully implement a conscious lifestyle of paying attention to wants vs needs, and there came a time when I had serious credit card debt, to the tune of $20,000, which took me several years to pay off. In the process of accumulating the bad debt, and paying it off, you better believe I learned how to be mindful and live a conscious life where I paid attention to wants and needs. More importantly, I learned how important paying attention to my spending is related to my happiness, cause I was miserable with that debt. Now, I truly believe being debt-free brings me way more happiness than my old habits – the newest phone, expensive clothes, or several nights out on the town every week… carelessly spending money on those things, and all sorts of other wants, make me cringe now knowing what that can lead to. I worked hard to afford my lower-budget dream car (and only mod it when I work an extra gig for it, or an investment pays out a lil’ sumthin’) and am completely content giving all the other stuff up. But that’s just how I roll now that I know myself and what makes me happy. Everyone’s different.
Kristina’s Truth… I don’t have a good example for “least lived on” because when I really didn’t have a lot of money and should have been cutting costs (in college) I used a LOT of credit cards. In 2007, soon after I graduated from college I had $11K of credit card debt, $79K of student loan debt, and I had a car loan of $21K (I look back like …uhhh). I took out way more student loans than I needed to because I was living way beyond my means. This was pre-Mint for me. It wasn’t until I put all of my expenses into a spreadsheet that I realized I was in a massive amount of debt (like any accountant would do on a Friday night). It was at that point that I focused on paying down debt. When I started using Mint, in 2013, I realized that I was spending $1,000 a month on clothes and soon after that I averaged $300/month. To put that into perspective I now spend on average about $100/month on clothes and some months I don’t even buy any. I have no debt now (except my mortgage for my condo and even that is covered by my tenant). Everything I pay with a credit card now, I pay off at the end of the month when it’s due (getting my point game up!).
Tayari’s “Two Cents…” In order for me to afford college, I took out student loans and worked my way through. A car enthusiast at heart, I went full throttle on my wants. My school loans paid for my books, tuition, and maybe left a few dollars that were enough to burn a hole in my pocket. Any cash leftover went to gas and car parts. I wanted the fastest version of my car in San Diego, and got a credit card to accomplish the goal. Without any understanding of how credit cards worked, I quickly maxed it out on my big turbo engine build to scratch my itch (project cars are like bottomless pits as far as money goes). Simultaneously, I was accruing debt (north of $7,000 for the engine build, not to mention the $3,000 tuition per semester) and there almost wasn’t an end or “redline” in sight. One day while trying to come up with money to study abroad in Spain, I added up what I’d spent on the car because I didn’t have enough. Reality kicked in, I really didn’t need the fastest car in San Diego; I was getting to where I needed to go (school/work) just fine. I made the tough call, sold all my parts (at a huge loss) and used the money to go to Spain… Looking back on it all now without regrets. I’ve long since graduated and, well, the credit card… that damn thing went to collections and for 7 years left a skid mark on my credit. Talk about a reality check… when I needed to buy a car a few years back, the interest rate I qualified for was about as high as an elephant eye! I’ve got my finances in check now, paid down all my bad debt, and know exactly what I need and exactly what I want. My once tarnished credit score is higher than it’s ever been, the plans for a new build are still in the works, as is a plan to buy my first place. The difference: my strategy, tools, and the financial education I gained, and now use, in efforts to plan to acquire my wants. Mint is an awesome tool that helps keep my wants vs needs in check. Now I have peace of mind without the guilt trip if and when I buy parts or whatever else might put miles on my smile =). Currently, all credit cards are paid off and/or managed at a 6% utilization ratio and I’ve started saving for my first house. Summer of 2021 I am looking forward to checking my first home ownership off the list.. If I can do it starting with a 313 credit score, then I believe you can too. Plan the work and work the plan.
It’s me, Yoichi! I grew up with a family business and had years of watching my parents scraping by with the ups and downs of owning and operating a business. These lessons growing up taught me things that made my decision easier when I moved down to San Diego for a full-time job. The job was supposed to be a long-term position but I was laid off when our division was closed unexpectedly short (after 1.5 years). I was living solo in an apartment and started my good life in San Diego with friends and minimal living expenses, but still had lots of wants. I wanted to stay in San Diego, I wanted to stay with friends, I wanted to have fun, I wanted to enjoy the single life, but what I really needed was a job to pay for my life to stay in lovely, and costly, San Diego. My temporary unemployment checks covered my rent and at that point I knew I had to use my savings for necessities like food, gas, and utilities. To last as long as possible in SD I chose to cut my cable (for TV) but keep my internet so I could stream videos (mind you this was 10 years ago before all the streaming available now), and I also minimized going out and having fun (which didn’t make me happy one bit, and contributed to my feeling lonely). I figured out that my savings would only cover about 9~10 months until I HAD to find a job. Unfortunately, with the way the single life can be in San Diego, that really only lasted 6 months. Reality smacked me in the face when I realized job hunting was very difficult out there in my field. I could have stayed in San Diego and kept draining my savings, but becoming dead broke and not being able to pay off my credit cards every month just wasn’t what I was taught to do. Fortunately my parents had taught me the importance of credit scores and so I understood the impact of carrying debt and not being able to pay things off, which would become a problem in the long run. So, I swallowed my pride and decided to move back to Los Angeles to my parents house and look for a job. In my opinion, sometimes you have to make the hard decisions to step back, reevaluate your situation, and cut back on the extras in order to make your financial situation better for your future.
Bottom line: Learn to live within your means… meaning: spend less, especially on your wants, so you have more money coming in than you do going out, each month.
Happiness is all about balance. We aren’t necessarily suggesting that you get rid of ALL of your wants, and do nothing other than work, cook, sit at home and only spend money on needs. What we are saying is to be aware and be mindful of balance. There are plenty of free things to do by yourself, with family, and with friends (unfortunately in some cities more than others). Every once in awhile it is important to treat yourself to something (that won’t break your bank hopefully) because all work and no play is definitely not the key to happiness either.
At this point something has probably resonated with you and you are wondering what to do about it. StaySmilinLife will provide articles and blogs focusing on different areas of money/finances that we are sure you will find useful. For now, we will leave you with two oversimplified answers to the question, “So… what do I do?”
***Spend less money and/or earn extra money***
Earn Extra Money
Side hustles are a very real thing and the opportunities that exist now are virtually limitless. Almost everything can be made into a hustle that you can get paid for… look – people literally whisper into microphones and rub the microphones with all sorts of objects and get paid. You will be surprised what people will pay for. Here is a list of gig websites that exist: https://www.thebalancesmb.com/best-sites-to-find-gig-jobs-4150364 . You can also think about what you know and how you can help other people. Maybe you’re good at planning events, taking pictures, or even doing other peoples make-up.
Another way to increase your income is through more education and accreditation. We understand the struggle and get that this route takes months to a few years to reap the results. The education, accreditations and licenses will not in themselves give you money, but what you do with them after can absolutely increase your earning potential. One important thing to keep in mind: do your research. Have a vision or career objective in mind and do the research. In an ideal world, the cost of the higher degree or certification or license will eventually more than pay for itself, once you land that higher paying job.
Spend Less Money
We know you’re thinking, “Well duh.” But let’s be real. We know you can cut back on spending. Do you know how much buying coffee a few times a week adds up to? Carlos once had a client who was $80 short on rent. After doing the budget with the family the numbers did not add up. Carlos looked around the house only to find cases of energy drinks in the house. Carlos asked and found out the family drank a few energy drinks a day… the money they spent on those drinks totaled way more than the $80 they were short. The reality is, you might not like what you have to give up to get your money right. The thing is, if you are already unhappy as it is, ya might as well try this out and see if you like it before you dismiss the idea…
Some tips to curb your spending and get to the point of spending less than what you make.
- Make a budget, even if it is a simple budget. Have you ever really taken a look at what you spend your money on? If not, we highly recommend Mint.com. All of us at StaySmilinLife had a beginning to our cost-cutting journeys, and let us tell you, it was eeeyyyeee opening. A few of us were spending most of our money on food – more specifically eating out. And if you drink… you’ll be surprised how much you spend on alcohol once you finally add the numbers up.
- Take a look at your monthly subscriptions. Monthly subscriptions are like pocket assassins. They are disguised with their low monthly fee but add up quick! Do you really need that Stitchfix, HBO NOW, beard/makeup boxes or clothes and accessories subscriptions? We think you’ll find most monthly subscriptions are wants, and not needs. We’re just saying… be honest with yourself. Free things can be super fun, and healthy! Try going on walks or hikes on for awhile… use BuyNothing Facebook groups, clothes exchanges… you get the point.
- Avoid lifestyle creep. What is lifestyle creep? When you get a raise, or start making more, or extra money, you have two options: You can keep your monthly expenses the same and push the extra cash into a savings or investment account (maybe you splurge 10% of the increase on somethin’ special), or you can start spending more money. It’s easy to start eating out more often, buy more clothes, buy a more expensive car, or take more trips (we get it, we too LOVE to travel, just have to make sure we can afford it!). In essence, you increase the amount of money you spend based on the additional income instead of keeping your spending steady and allow the increase in income to go towards additional savings or set aside for future investments.
We Believe in You
Again, it is important to remember choice and balance. Take care of your needs, and then figure out if you can afford all, some, or one of your wants. And by afford we mean (in a bare-bones basic sense), at the end of the month, you spend less than you make. If you can get these two bare-bones basic financial concepts down, and actually use them to influence how you use your money, you will give yourself a shot at controlling your finances, and, we hope, you find yourself smiling a little more often.
