It’s Hard to Overcome Our Structure
Someone contacted me with a problem. A couple in their mid-40s, two kids. They believed they were being responsible with their money, but it felt nearly impossible to make financial progress. As they put it, they didn't waste money, spend money frivolously, or buy nice things. Yet, they lived month-to-month and had much financial tension in their marriage.
I sat down with them to review their numbers. Here's what I found (shared with their permission):
Combined Take-Home Income: $8,200
Mortgage Payment: $3,600
Car Payments: $1,600
Other Debt Payments: $700
Do you see a problem here? Just their house payment is 43% of their take-home income. The house plus the cars account for 63%. Then, when you tack on the rest of the debt, these three categories account for 72% of their take-home income.
That means they only have $2,300 left for all other needs, wants, giving, and saving. That's not nothing, but wow, it's tight. So when they say they don't waste a bunch of money or spend frivolously, I believe them. There's no money to waste!
Here was their question: "How do we find margin? Where do we cut?"
These are tough situations. Unfortunately, it's hard to overcome our structure. This family had created a really expensivefinancial structure for their household. Based on THEIR choices, more than 70% of their income was already spoken for before it hits their bank account. No amount of trimming or cutbacks can help this family remedy what ails them.
Whether we want to admit it or not, these are OUR choices. The cities we reside in. The residences we choose. The cars we buy. We can cry foul all we want, but at the end of the day, we have choices to make; and these choices will dictate our structure.
Here's what happened. I pointed out that there are very few options to help this family without them significantly altering their structure. They can't cut groceries, utilities, dining out, clothing, entertainment, or any other budget items enough to move the needle. It's hard to overcome our structure! I couldn't let them go home empty-handed, though. Here are the options I floated by them:
Increase their income
Downsize their residence
Sell one or both vehicles (and replace them with cheaper alternatives).
Use some of their assets to pay off their non-car and non-mortgage debt.
Outside of these four levers, very few options exist to help them. Their structure is their structure, and it must be addressed for what it is. It's tough, but reality.
I hope this family takes a hard look in the mirror and decides to take drastic action; only time will tell. I sincerely believe their life will unlock if they are willing to humble themselves and make difficult choices.
The same goes for you....and me. We can trim around the edges all we want, but our financial structure significantly impacts our journey. For some of you, it may be time to alter your structure.
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