All your Expenses: Essential or Optional?

whatgoes_budget_filter21.gifA young couple came to me several years ago. At the time, they had a good combined annual income of over $100,000 yet owed $20,000 to credit cards, and they were adding debt at the rate of almost $2,000 per month. Despite their high income, they were spending considerably more than they were earning.

When we reviewed their situation, I discovered that a lawn service visited their home four times a month, at $85 per visit. I told them to cancel the service, and he replied, “But our lawn will look terrible if we do that! We must keep this expense.”

I also noticed that they subscribed to cable TV, including every premium channel — a monthly cost of $97! I told them to cancel cable. Monica gasped. “There will be nothing for us to watch! We can’t cancel cable!”

I’m sure you’ll agree with me that a lawn service and cable TV are optional, yet neither understood this. Both these expenses are optional, just as — pardon me for shocking you — almost your expenses are optional.

Health club membership? Optional. Entertainment? Optional. Telephone? Optional. Clothes? Most of it — or more accurately, the total money you spend on it — is optional.
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Are you getting my point? Almost everything you spend on is optional. So don’t tell me, “I got to do this, I got to do that.” Sometimes, though, you’ll find that you’ve been spending money on a certain item or in a certain way for so long that by now, not only can’t you remember when you didn’t spend money like that. Again, let me repeat: Almost everything you spend money on is optional!Cable TV is optional. Hard to believe, but true.

You stop spending your money on things that in the bigger picture really don’t matter. You change it. You fix it. You can stop it.

Don’t feel locked in or trapped, because you are not. True, there are some expenses that you cannot change easily or quickly. Once you buy a car, you’re stuck with the payments. But most of your spending is much more flexible than you might think at first. You are in more control of what’s happening around you than you realize. But you’ve been doing it for so long for so long that you’ve forgotten that you do have a choice about how you spend your money.

The bottom line is that you got into debt because of your attitude, not your income. And it is your attitude about money that must change first, or changes in income won’t matter.

By refusing to change how they spent money, they sought other solutions for their debt. And they found one: the equity in their home. They owed $150,000 on their $200,000 home, so from the $50,000 in equity, they borrowed $25,000 and used that money to pay off their credit cards. Problem solved, right?

Wrong: Within a year, their credit card balances were back up to $24,000, only this time they no longer had $50,000 in home equity to rely on. Within two more years, unable to keep up with the payments on their house, they sold it and rented an apartment (at least that ended the lawn service). Still, it wasn’t enough, and they later filed for bankruptcy. It will be 10 years before they are able to buy another house — if ever.

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8 Responses

  1. Shane says:

    Always staggers me when people cannot let go of silly expenses, and at the same time they’re drowning in debt.

    It’s a cycle of fear and insecurity. As the debt gets worse, they’re less willing to give up these expenses so they can maintain they’re lifestyle. Just makes it worse.

  2. Robin Bal says:

    Hi Shane,

    Staggers me too mate. Getting deeper in debt and yet not willing to let go of those lifestyle expenses. Guess it becomes a way of life with them, but what a way of life when you are getting deeper and deeper in debt.

    Nothing like living debt free.

    Take care and cheers.

  3. Manila Mom says:

    Can you imagine how that looks to us in third world countries? I’m glad that we have been used to living with basics, with simple luxuries every now and then. Still, even here we see people living in excess, which makes it quite scandalous.

  4. Robin Bal says:

    Hi Maia,

    Thanks for your visit and comment. I don’t think it looks too different to us here in third world countries. Some of us are used to living with basics and you still see lots of us here living beyond our means and neck deep in debt.

    I guess we all have a choice how to manage out expenses, its just which way you choose. I have been in debt and have spent sleepless nights over it, don’t wanna go there again mate.

    Take care and cheers.

  5. Robin Bal says:

    Hi Buddy,

    How you doing mate? Thanks a lot for adding value to this post of mine by including it in “Smart Posts Worth Reading”.

    Dont see you on Skype these days guess you are real busy, well so am I on my holiday…lol.

    Take care and cheers

  6. Anna says:

    Sorry mate… have to disagree on the telephone as being optional (You ever try to call 911 without a phone?! 😉

    I have to admit though, I’m one of those people who spends a lot on optional goods. One of these days I may sit myself down and figure out just how much I’d be saving without my little conveniences!

    Have a great day!
    Anna

  7. Robin Bal says:

    Hi Anna,

    Yeah you are right you need a phone to make a 911 call if you have to. Thanks for pointing that out.

    What I actually meant was saving money on unnecessary local and international calls.

    Take care and cheers

  1. June 24, 2007

    […] All your Expenses: Essential or Optional?: Are you spending money on non-essential stuff? Robin wrote an excellent post on the topic. A lot of my expenses are optional, and I could actually cut my expenses by half. You have to think ahead of time, and plan your expenses, what will it be like in a year from now, or 10 years from now. Robin has a great story about that on his blog. […]

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