For many of us making more money is something that we are always striving for and is something that we look forward to at the end of every year. But have you really thought about why that is? Many will say that it’s plain and simple–making more money will put us in a better position financially and solve all our problems, right? Maybe.
Make A lot of Money, Spend Even More
Back in March Sports Illustrated wrote a fascinating article on How (and Why) Athletes Go Broke. The shocking statistics are below:
- By the time [NFL players] have been retired for two years, 78% of them have gone bankrupt or are under financial stress because of joblessness or divorce.
- Within five years of retirement, an estimated 60% of former NBA players are broke.
How? Why? If you really want to know then I highly recommend the Sports Illustrated article above, but if you boil it down, professional athletes aren’t going broke because they didn’t make enough money it is because they didn’t keep enough money. They have a problem with cash flow.
What is Cash Flow Anyway?
Income – Expenses = Cash Flow
When we talk about cash flow, what matters most isn’t really how much you make or spend, but rather how much you keep that will make a difference. Let’s say for example that you made it to the big leagues and were making a ridiculous amount of money, say $5,000,000 per year. But due to the pressures of super stardom, you spend $5,000,001 per year just to keep up with the Joneses Kardashians. So does making more money really solve your problems? In this case, not really. But it can IF you knew how to manage your cash flow.
The Best Kind of Diet Plan
For a lot of Americans, the idea of having a budget is treated more as a triviality and as a suggestion rather than a steadfast rule. Let’s face it. Having a budget sucks. It’s like going on a financial diet–that’s die with a t. Nobody likes limitations. Maybe that’s why consumers love their credit cards so much. But for those of us that see the bigger picture and are building foundations for the long term, we know that having a sensible budget will go a long way in increasing our cash flow and avoiding debt, or even bankruptcy.
What Are YOU Going To Do About It?
If we really want to increase the amount of money we have, we really only have a few options:
- Increase the amount of money we earn
- Cut back on spending
- OR do both
What are you mostly focused on? Is it even possible to do both at the same time? Is this all really worth the time effort? Ultimately the choice is yours. For me, the choice is a no-brainer. The idea of having money coming in and growing while sipping a cold mai thai in some remote location in the world, is an idea worth fighting for and a dream that deserves my best effort.
Tools and Resources
- For those that don’t already have a budget and would like to get a brief overview of your cash flow, here’s a pretty comprehensive worksheet from MSN.
- For those that value elegance, simplicity and ease of use, check out Mint.com. This is what I personally use.
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