April 12, 2012, 6:00 am

Are You Just Staying Afloat?

by: MD    Category: Financial Planning
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Last week we looked at the idea of saving money in your 20s. We looked at the importance of saving money in your 20s. A few interesting comments were brought up.

Krantcents summarized it best:

“It is unfortunate that the best time to save (in your 20s) coincides when we are too immature to do it.”

Danny chimed in with:

“There are a lot of conflicting sources of information on how you should live your life, and when you’re young, it’s easier to listen to others than sit down and decide for yourself. What it comes down to is a choice: save a little bit now while you’re young (even if it’s hard) and watch it grow over time, or vow to save later. The “saving later” mentality CAN work, but it’s hard because habits form and “later” keeps getting pushed back. Few people will tell you they wish they saved less.”

Today I wanted to write about the idea of actually getting ahead financially.

Here’s a quick story before I get started.

I was chatting with a buddy about finances the other day and he brought up how he was upset because he only had $60 left over until he got paid in a week. I didn’t want to be rude or to ask about this, but he went into further detail. He brought up his insurance payments, car payments, costs of living, and other expenses that were dragging him down. He went on to explain how it seems that he never has any money because everything goes to bills. I tried to give him some tips, but I could tell he was more interested in feeling sorry for himself instead of taking action.

This brings me to the idea of staying afloat in your 20s. What does it mean to stay afloat? In my eyes in means to stay in the same financial/general life position for a long time. No real improvements, minor setbacks, and overall plateau. No savings, no major increase in income, and no positive changes.

How does someone get to the point where they’re just staying afloat in their 20s?

  • Debt racked up in their 20s/student loans.
  • Poor decisions.
  • Financing a car.
  • Buying a home you can’t afford.
  • Renting an expensive place.
  • Maintaining a lifestyle that’s not realistic.

That’s how you screw yourself over financially in your 20s. What’s so bad about staying afloat?

  1. You never have any money.
  2. You’re stressed out.
  3. You can’t save for the future.
  4. You’re always behind.

Now that you realize how someone gets to this position and what the negatives are, how can you get out of it? How can you get your head above water if you’re stuck staying afloat?

Make a commitment to change.

The time for talking is over. At this point you need to commit to change. You need to be ready mentally to make changes. If you put in a half-hearted effort, then you won’t see any positive changes. You need to be willing to go all or nothing.

Reduce your expenses.

You need to do everything you can to reduce your expenses. While I’m not a frugality zealot, I totally realize the importance of cutting back on the crap. You need to cut back on expenses if you want to actually have any savings.

What are expenses that can be easily reduced?

  • Stop driving everywhere.
  • Eat at home.
  • Go out less often.
  • Pay yourself first.
  • Get a free banking account.
  • Cut out memberships you don’t use.

Increase your income.

Now it’s time to make more money. Once you commit change and reduce your expenses, you’ll be on the right track. You just need to increase your income now. You want to be able to beef up that savings account. The best way to do this is to make more money.

How can you increase your income?

  • Ask for a raise.
  • Sell your crap.
  • Find a new job.
  • Ask for a promotion.
  • Start a side business.

Suck it up.

You need to just suck it up and man up. You’re going to go through a challenging time. So what? You have nobody to blame but yourself. Nobody likes to sacrifice. The truth is that when you’re staying afloat you need to make some drastic sacrifices to get ahead. The bad news is that you’re not going to have as much fun for the next few months. The good news is that you’ll finally get your head above water.

I hope that after reading this piece you plan on making a conscious effort to improve your situation. Life’s too short to spend it staying afloat. It’s time that you got ahead. If this article doesn’t apply to you, then you can always send it over to a buddy or friend in need.

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by: Frugal Guy with Balance | April 12th, 2012 (7:49 am)

I love your message there is too many folks taking the easier softer way.

If your in debt up to your ears you have to start swimiing and stop floating along.

If you do not have the cash to purchase discretionarey stuff then save for it.

The instand gratification has to stop if folks want to have some peace/serenity long term. There is nothing worse than having credit maxed out.

It is time we took the gloves off and told it like it is. Great article my kinda message.

The only ways to increase disposable income are to: increase income, decrease spending, sell stuff w/ payments (cars, houses, etc), or to pay off debt.

Getting finances in order requires sacrifice. I think most people fall into this category, but you said it well when you mentioned he just felt sorry for himself and didn’t really want to take action.

A lot of us don’t.

I would think for most young people the biggest problem is that they usually find a way to spend all of their money, no matter how much they make. If they do save up a bit, they see it as a reason to go on an expensive vacation or splurge on whatever new toy they’ve been eying. They just don’t truly appreciate the power of starting to save at an early age. They justify it to themselves saying that they’re only young once and think they have to spend lots of money to enjoy it. Peer pressure it also the strongest when you’re young.

You guys both hit it Modest Money & WorkSaveLive. If you can’t decrease your spending, even for the short term, you’ll never be able to get ahead.

The reason most 20s cannot save money because they just started to taste the power of money. They just started working and earn money for them to spend. The cannot resist the urge to spend money because they are just starting to have the power of making decisions.

Knowing what is important verses doing what everyone else can go a long way. Just because everyone has a new car with payments doesn’t mean its the right or best thing. Sometimes a used car is what people really need. I am with WorkSaveLive you have to make scarifices. Unfortunately people scarifice the savings, and other stuff and get things they don’t really need like eating out, traveling, clothing etc. Have some balance.

Well said. People usually become part of their own problem, not the solution. Suck it up and commit to change!

It’s just about realizing your mistakes and changing them. One of the best decisions i made in my mid twenties was to get a part time job. I only worked a 2nd time for about 5 months. I made 5k and dumped it all into my debts and paid everything off. That 5 months probably changed the rest of my 20s. I was able to start saving after that, and managed to save up about 2000. That was near the bottom of the recession. I bought bmo stock at about 25 dollars and sold it for 52 about 6 months months later. Now looking back, probably not the most thought out decision, but one that worked out great! That year and a half changed my life. I went from having negative networth to a postive one, having a savings plan, and finished my CFP which allowed me to almost double my salary. I think what you do in your 20s really can set you up for the future. But its never too late to make those changes even if your past the age.

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A few years ago, we were just staying afloat, granted we kept sinking here and there. We’ve made a lot of changes and taken small steps over the last few years and will continue making them. We finally have savings, retirement accounts, investment accounts and it WAS WORTH IT. Small sacrifices here and there, little bits adding up and I can’t imagine ever going back. 🙂

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