Human beings are creatures of habit. Some of those habits are good. Most of us brush our teeth every day. But some of those habits are bad and can lead to becoming stuck in a rut. When those habits are financial, they can have serious consequences.
And not just for your bank account. Being stuck in a rut financially, making the same mistakes over and over, is terrible for your mental health too.
Financial strain has been found to reduce relationship satisfaction, worsen depression, and lead to emotional problems, health difficulties, and poor work performance.
Your financial life is your whole life. That’s not to say that money is everything, but when you’re under financial stress, it impacts every area of your life. The financial decisions you make don’t happen in a vacuum. In many ways, overall well-being is closely tied to your financial well-being. To move forward with your goals and plans that aren’t financial, you have to get financially unstuck first.
You know how Einstein defined insanity, don’t you?
The definition of insanity is doing the same thing over and over again, but expecting different results.Tweet This
When you do things differently, better, correctly, you’ll get a better result. You’ll be amazed at how life opens up when you stop doing what you’ve always done and start doing what you haven’t tried before. If you’re feeling stuck in a rut, there are small steps you can take to get financially unstuck. And you don’t need an expensive financial advisor to do it.
Some financial ruts are dire; you’re in a bad personal financial situation and utterly aware of it because you’re eating a lot of ramen and trying to decide which utility you can live without. Not everyone who is stuck in a rut financially is broke or having short-term financial difficulties. But those ruts can have repercussions in the long-term that we can’t see at the moment.
Whatever kind of financial rut you find yourself in, these are the solutions.
You Live Paycheck To Paycheck
There are people whose finances are on the knife’s edge. They have no emergency savings. They’re operating on such a small margin that there really is nothing they can cut out. But that is not the case for most of us in America.
We might not spend lots of money on high ticket items, but we spend money on lots and lots of “little things” that we don’t realize and don’t need. At the end of the month, we come up short. We can hardly pay our bills, never mind save or invest.
The solution is to pay yourself first. A percentage of every paycheck, ideally 20% goes first into savings or investments.
I know, I can hear you, “Where is this magical 20% coming from, unicorns?” That would be great, money-bringing unicorns are way more useful than cheap chocolate-bringing rabbits. But we live in the real world where we don’t have unicorns, only dragons.
So you’re going to find that money by creating a Mint account.
Mint is our favorite budgeting tool because it’s free and easy to use. Connect your financial accounts and Mint will pull the transactions and categorize them although you may have to recategorize some of them.
Mint will tell the tale.
You had no idea you were spending $50 a week on your work lunches or that you forgot to cancel the free trial period for Pandora and now you’re paying for something every month that you don’t use much and is totally unnecessary.
Mint has given you a new perspective on your spending but knowing where your money is going is just the first step. To get the most out of it and end the paycheck to paycheck rut, you need to use it to budget too. We like the 50/30/20 method. Simple and straight forward.
It can take time to get into the habit of staying on budget, especially if your overspending is not just a mindless thing but rooted in something more profound. But there are a few easy things you can do right now to cut spending pretty painlessly.
Trim is like having your own financial, personal assistant. The app looks through your accounts for recurring monthly expenses. Things like that Pandora subscription, your gym membership, and your seven different TV streaming services. When Trim finds these charges, it will message you asking if you want to cancel them. If you do, that’s it. Trim does the rest for you.
A couple of years ago, I used Trim and saved a whopping $70 a month. I’m not saying you have to cancel something you use and benefit from like a gym membership, but you may be paying for things you don’t use often enough to get your money’s worth or that you just forgot about.
Another tremendous money-saving tool is Billshark. The service can negotiate better rates on your cable, cell phone, satellite TV and radio, internet, and home security systems. No comparison shopping and no waiting on hold trying to get through to a human on the phone. Just savings in your pocket every month.
You Don’t Invest
Maybe you don’t live paycheck to paycheck. Perhaps you have a 12-month emergency fund and coffee cans loaded with cash buried in strategic locations. You don’t spend more than you make, you don’t have credit card debt, and you paid off your student loan years ago. Sounds great and you might think, job done! That’s all of your financial goals met.
Even people who are smart about personal finance in a lot of ways can be afraid of investing. It can seem so complicated and just not something regular people do. That’s simply not true, but it’s an understandable feeling because plenty of people have a vested interest in fostering that belief. They want to manage your money for you for a hefty fee or sell you a book or some gold coins or a seminar.
Investing over the long-term will make you money. You don’t need a ton of financial education or insider knowledge or tons of money to be a successful investor. If you have $1, five minutes, and an internet connection, you can open a Betterment account and boom! You’re an investor.
For those of us who don’t make high six figures or have a trust fund, investing regularly and long-term are how we are going to achieve wealth and financial security. There is simply no two ways about it. You must invest.
You Don’t Ask For More
When is the last time you had a raise? After the blood bath caused by the Great Recession hit the United States and much of the rest of the world, people who still had jobs were not about to rock the boat by asking for a raise.
And let me tell you, employers loved this. They wielded the guillotine, made the remaining employees do the job of three people, knew people were too afraid of losing their jobs even to take the vacation days they were entitled to, never mind ask for a raise.
But that was more than a decade ago. It’s time to ask for more. You need to be strategic, though.
- Know Your Worth: Go on comparison sites like Glassdoor and PayScale to see what those in your area, field, or job in similar-sized companies are making. You could be grossly underpaid or making about what you should. Either way, you need to know.
- Sing Your Praises: What have you done to deserve a raise? Come armed with a list of your achievements since your last raise, even better if these achievements can be expressed numerically, ie, I brought in $X in new business, I saved X% on the firm’s travel expenses, etc.
- Negotiate: The ability to negotiate doesn’t come naturally for all of us, but you can fake it til you make it. One of the best episodes we ever did, in my opinion, was on how to negotiate.
- Be Ready To Walk: If you don’t get what you want (within reason) and you know the company is in a position to give it to you but won’t, you have to be ready to move on. That brings us to our next point.
You Love Your Comfort Zone
Tough shit. I don’t want to hear it. I left my home of 15 years to move to a city where I didn’t know a single person at the ripe old age of 41. If I can do that, you can step out of your comfort zone and embark on a job search to find a better gig. And finding a better job is the way to really improve your financial situation, more so than asking for a raise.
Our main finding was that nearly two-thirds of the sample (65.1%) received a base salary increase between 10.1-20%, which is quite strong compared to the so-called “merit” salary increase of 2-4% that one might receive staying at the same job each year.
And jobs aren’t the only comfort zones we get stuck in. If you really want to change your life and improve your financial fitness, move to an area with a lower cost of living than your current one. When I moved from NYC to New Orleans, my rent went from $2,300 a month to $875. My emotional health and my financial health improved immensely.
What’s the point of living in a fantastic city if you can’t afford to partake in any of the things that make it amazing? New Orleans is the perfect blend of tons of things to do and being cheap enough to be able to have enough money to do them.
We recently interviewed a guest about the FIRE movement, and she talked about how geographic arbitrage was a big part of achieving FIRE and allowing her to live the kind of life she wanted, a life not so focused on money.
You Don’t Hustle
Everyone should do something that brings in some side income, yes the infamous side hustle. Few of us are sooooo busy that we don’t have enough time to do some hustling. If you want to stop being stuck in a rut, a new hobby that brings in some money is an excellent way to do it.
There are all kinds of side hustles, so there is something that will fit everyone’s skills and free time. You can answer surveys on mobile apps like Survey Junkie and InboxDollars. You can start a blog or a podcast. Drive for Uber or Lyft, rent out your place (or someone else’s) on Airbnb.
There is no bigger rut than going to work for someone else, coming home and watching TV, going to bed and then getting up the next day and the next and the next to do the exact same thing.
Take a break from that and do something for yourself.
You Never Learn
Some people scrape and claw their way out of thousands of dollars of credit card debt and then start charging up their balances again. Some people file for bankruptcy more than once. We all make mistakes, so there’s no need to feel bad.
But not learning from your mistakes, especially the really painful financial kind, is worse than being stuck in a rut. It’s some form of self-sabotage. That’s something that no amount of financial literacy or financial coaching can fix. That’s possibly something you need professional medical help to overcome. The problem is seldom the credit cards in our pockets, it’s the problem in our brains.
A Sticky Situation
Being stuck in a rut is a temporary state of being, but you can stay in that state for a long time. Ruts are weirdly comfortable. They may not be ideal, but they are familiar, and that’s really what being stuck in a rut comes down too. It’s familiar.
Sometimes attaining the deepest familiarity with a question is our best substitute for actually having the answer.
Be someone for whom familiarity isn’t good enough. Be someone who searches for the answer. Because curiosity may have killed the cat, but the cat died knowing.