One of first chapters in the Money Tools book is called Broke Is the New Rich: It’s pretty much for anyone under age 40 or so who’s mentally decided they just can’t ever get ahead.
Being broke isn’t fun. It’s also stressful and leaks into every other area of our life from concentrating at work to relationship fights to bouts of depression. But a lot of times it’s not necessary. Last week I hired a taper/mudder to do my basement stairs and storage room – something I absolutely can’t/and refuse to do. He texted me before coming out on Saturday. “Good morning, George. I barely have any gas. I think I can make it out there. But making it back will be a problem. I know this may seem a little unprofessional of me but I figured it’s just best to be honest.”
His text was a roundabout way of double checking that he was going to get some money for the day of work. He did make it here and started the work. It turns out both him and his girlfriend worked for a painting company for over a week that stiffed both of them for their entire pay. It’ll now be a while before the Labour Board will get him paid. He’s 20-something and obviously honest and motivated to work on the side, he’s reliable (THE most important trait an employer looks for or should look for) and talented. He’s likely just ‘in between money’ and a victim of circumstances.
Before you find yourself needing to send that type of text, or to ask the question, stop for a second. No matter how broke or cash poor you are, get yourself some mini-emergency money. Put a $10 bill in your glovebox with your registration. It’s emergency gas money. It’s not an emergency to get you to McDonalds. It’s emergency gas money to be able to drive to a job that will make you money. As soon as you can afford it, change that $10 bill to a $20 and your stress level, constantly worrying about it, or having to send that text is gone.
At home, hide a $20 bill somewhere. It’s emergency food money. Not a skip the dishes emergency, or liquor store crisis – it’s for milk, cereal, bread-type emergency. As soon as you can afford it, up it to two $20 bills, then a $50 bill instead, and when you can, hide a nice brown $100 bill somewhere.
If that sounds small or silly, you either haven’t been in that stressful situation, or don’t understand how others could be. But it’s more common than you’ll ever know, and it works and it’s worth it to reduce your stress level by a lot.
When you’re ready, set up a proper emergency account (see page 223 of the Money Tools book). Start by getting it to one week of your net pay and work your way up to three months of all your expenses.
From the $10 bill tucked away up to three months money in the bank – all of them take an emergency and turn it into an inconvenience.
Contrast that story with the one in the Money Tools book: Michael really wanted to get out from under his $3,200 credit card balance. Luckily, his work schedule came out with a New Years day opportunity. He had the chance to work a 10-hour shift on January 1st at double-pay. That would earn him over $640. It would mean passing up his New Years’ eve plans to attend a party. The party turned out to be his priority. The night cost him over $300 as he later admitted, versus $640 of extra income. Had he chosen the alternative to work, he would have been close to a thousand-dollar positive swing in his finances.
Talk about two very different 20-somethings! As I’ve said before: Don’t tell me what your financial priorities are – show me where you’re spending your money and I’ll know where your financial priorities really are.
My guy will be successful. Michael is just playing a huge self-defeating financial game, the reason we’re poorer than we think, and my question in frustration if I should just mail him the $1,000.