I'm cursed with an interest in all things financial. Sometimes I read an article and think “I'll never get that time back.” In fact, the percentage of articles that qualify as silly is ridiculously high. For example, take a look at this one I read a few months ago. It was entitled 7 Signs You Don't Make Enough Money. Just like you, I'm a sucker for lists on the internet, so I had to read it. Then I had to laugh. Then I cried, because I wondered if people really believe this stuff. It's written by a “Money In Your 20s” expert. I bet there is a financial designation for that. It probably has 5 letters and some “financial advisor” out there is using it to sell high-expense deferred annuities to 25 year olds as you read this. Just for fun, let's look at the
7 Signs You Don't Make Enough Money
# 1 You are using your credit cards every month
Shoot. I don't make enough money. Beats me why I get phased out of my exemptions when I clearly use my credit cards every month. Maybe I should send my credit card statements in with my tax return next year.
If you read carefully, however, the author is talking about using your credit cards at the end of the month because you don't have any money. She's talking about spending NEXT MONTH'S income. In my experience, that usually isn't an income problem. It's usually a spending problem. It is at least a discipline problem and probably a stupidity problem. Credit card companies don't give credit cards to people with an income problem. I guess she could have written payday loans and that would be dumber. But I'll tell you what, if you get halfway through the month and don't have any money at all, you're broke (at best.) I suppose that could be an income problem, but I doubt it. That not only means that you spent as much as or more than you made this month, but also that you did the same thing for all the previous months of your entire life. In the race to accumulate assets to become financially free, you're still on the starting line, or worse, moving backwards.
# 2 You run out of money at the beginning of the month
The only thing worse than running out of money at the end of the month is running out at the beginning. Seriously? Was the concern that no one would read an article titled “6 Signs You Don't Make Enough Money”?
# 3 You can't cover your bills
So, you spent money you don't have. Now, the people who gave you that stuff want to be paid and you can't pay them. How is that an income problem again? This author seems to be under the misconception that if she only made enough money, the bills couldn't possibly be larger. I'd like to introduce her to a few doctors I've met.
# 4 There's nothing else to cut
This one, however, I agree with. When there is nothing else to cut out of your budget, and you are still hungry, then you truly have an income problem. Actually, I think an income problem starts way before that. When it becomes easier to make more money than to cut more expenses, you have an income problem. However, in my experience, far too many people think there is nothing else to cut while they're still living in a huge house, driving a fancy car, talking on a fancy smart phone, eating in fancy restaurants, and watching fancy movies. Having “nothing to cut” is usually a creativity/vision problem, not an income problem. If you think you have nothing to cut, go check out a frugality blog some time. It is amazing how little you can spend and still get by.
# 5 You can't handle an emergency
Yet again the author has rephrased “living paycheck to paycheck” into another item on the list. The phrasing on this one cracked me up though. Check it out:
When you are stretched tight each month, it is difficult to put money aside in an emergency fund. If you are not able to handle an emergency, you may end up using your credit cards. Eventually your credit card payments will grow large enough that they cripple you even more.
Would someone please explain to this “Money In Your 20s” Expert that credit cards are not for credit? They're for convenience, and the day you start paying interest on them should be the last day you ever use one. You've just shown that you don't have the discipline to use a convenience card. You should consider that a privilege for good financial behavior. The author makes it sound like, “Duh…when you run out of money you use your credit cards instead.” No. When you run out of money, you stop buying stuff. Hopefully, you stop buying stuff BEFORE you run out of money. Then when an emergency comes along, there is some money for it.
# 6 You are constantly worried about money
While I don't doubt that there are people out there who constantly worry about money, and some of them even have an earning problem, this one is awfully good evidence that this list could have just as easily been titled, “7 Signs Your Savings Rate Is Too Low.” The quote makes me laugh though:
There is a difference between worrying about how to pay for an unexpected car repair, and the sick knot in your stomach that never leaves as you worry about how to pay for groceries or cover the rent. If you are worrying about money constantly, and it is keeping you awake at nights, you are likely not making enough money.
The idea that it is okay to worry about how to pay for an unexpected car repair is bizarre. That's not okay. You should never have to worry about that. The idea behind becoming financially independent is to amass a large sum of assets, not a few hundred or a few thousand dollars. We're talking about hundreds of thousands of dollars, and for the big spenders who think wakeboarding is an acceptable hobby, millions. If you're worried about a $400 water pump, how are you going to scrape up a sum that is literally 1000 times that large (and will only provide an annual income of around $16K?)
# 7 You are not reaching your financial goals
Well, there are a number of variables in any equation that involves a financial goal- income, savings rate, time, and rate of return. If you are not reaching your financial goals it is possible that is due to not making enough money, but it is also possible that you aren't saving enough of what you do earn, didn't start early enough, or aren't investing wisely.
Well, that was kind of fun. Let's get downright serious for a second though and talk about….
6 Signs You Actually Do Have An Income Problem.
# 1 Underemployed
You want to work more, but cannot find anyone to pay you to do it. People who truly don't make enough, are generally more than willing to trade some more of their time for money.
# 2 Underpaid
If everyone else doing your same job is making more than you, then you have an income problem. Fix it. Go get a new job and then give your current employer an ultimatum- match it or rehire. I actually find it surprising just how little many physicians are willing to work for. If you are not very familiar with what your skills are worth, I would suggest hiring someone who is to review your contract and do your negotiating for you.
# 3 Making less than minimum wage
You are working 100 hours a week to get your own business going but your hourly pay rate is less than minimum wage. There better be some light at the end of this tunnel, or you had better really enjoy your work.
# 4 You start trading things you value highly for the opportunity to work
I saw a man in the ED the other day who cut the cast off his hand because his boss told him that he wasn't going to pay him if he couldn't work on engines, and he couldn't do it with the cast on. This may also be the parent who would rather be raising kids than working for pay.
# 5 You spend more than twelve hours hungry every week.
Want to learn the difference between wants and needs? Take up backpacking!
I go backpacking from time to time. The goal is to arrive back at the trailhead without any food, water, or fuel having used everything in your pack at least once. When you're carrying something on your back for hours, you make darn sure you really need it. If we had to carry everything we buy on our back for the rest of our lives, or even for a day, we sure would own a lot less stuff.
At any rate, if you're NEVER hungry, you're almost surely eating more than you have to. And food isn't free. Plus it makes you fat, which makes it hard to mountain bike. It seems silly to spend $1000 to cut 500 grams off your bike when it would be far easier to lose 500 grams off your butt. But if you've cut back on expenses to the point where you're spending more than a few hours a week hungry, and if you had a little more income you would spend it at the grocery store, then you've probably got an income problem.
# 6 You cannot afford to purchase a reasonable amount of property, liability, disability, life, and health insurance AND eat.
Some blog readers think I hate insurance and those who sell it. On the contrary, I'm a big fan of insuring against financial catastrophes. When people have to choose between true necessities (like food and shelter) and smart financial products like appropriate insurance, they've probably got an income problem.
And of course, let's finish off with…
1 Sign That You Probably Do Not Have An Income Problem.
# 1 You're reading this site.
This site is aimed at high earners. The likelihood of you, dear reader, having an income problem is extremely low. Keep that in mind that next time you think to yourself, “If I just made more money I could…..” The truth is that you can do “…….” if you would only optimize your finances and prioritize the expenses you care about. Retire early? You can do that. Pay off your student loans in a couple of years? You can do that. Buy a boat? You can do that. Buy a second home? You can do that. Vacation in Fiji? You can do that. Drive a Tesla? You can do that. But you can't do it all. You make enough money to do anything you want, but you will never make enough to do everything you want.
What do you think? How do you avoid reading dumb financial stuff on the internet (like this article?) What is keeping you from reaching your financial goals? Is it your income? Your savings rate? Your investment return? Or the fact that you didn't figure it all out until you were way behind? Comment below!
Like many of you I enjoy reading news and entertainment articles online. One compiler of financial articles is the Microsoft Money app. I originally got it because it was an easy place to see if my 3 funds are going up or down (not surprisingly they did go up and down). I would then venture to the article portions. After a couple months of reading these articles I began to realize that they were not all created equally. The less valuable ones were the daily reason why the stock market went up or down articles and the lists. 7 things you should be doing before the end of the year, top 8 things people in their 20s, 30s, or 40s should be doing, etc.
How about top 7 signs that I have a smartphone problem, or that I don’t spend enough time with my children, or that I really do have enough time to get all the yardwork and housework done, or have time to go to the gym, or cook healthy meals.
Lists are clickbait for sure. I can’t believe how many more clicks I get if I make a list!
Lists are perfect. People love them and theyre great for advertising as those slide ones give new ads each list number.
Those are a bit of a pet peeve for me, so I’ve avoided them. One page per item, big wait as the new page and ads are loaded etc. Ugh. I don’t even like multi-page articles when they’re long. There is no limit to how long an internet page can be. The only reason to divide it up is to generate more clicks/ad views.
Yes, sometimes I really want to know what the list of x best y is, but cant do those things. Frustrating.
That people use credit cards for credit is terrifying.
Basic personal finance should be taught in high school.
That said my fiancée and I run about 80% of our monthly spending through credit cards including our rent. We pay the balances off completely usually on a weekly basis.
Because we don’t have kids yet, and enjoy traveling, the cards are very useful and spending can be leveraged for flights, hotels, etc. especially for expensive intercontinental flights. For 2015, we received $10-15k worth of free travel.
Based in part on your book and blog’s recommendations, we’re in a pretty good place otherwise putting aside $100k plus a year between both our 403b’s, my 457b, backdoor Roth’s x2, and maxing out HSAs with her educational debt paid off and mine being paid off by a government grant (NIH LRP).
Anyways, the credit cards can be great, you just have be very self-aware about how you’re spending and what you’re doing with them.
Why do you pay them off weekly? It seems odd to me to not just let the whole kit and kaboodle get paid off with autopay on the due date.
Yeah, that’s a fair point.
The upside of paying weekly is that it allows me to keep an eye on my expenses.
A very close eye. 😉
I’ve become pretty good at just swiping past the silly articles in my RSS reader and skipping them elsewhere. Your article was amusing though 🙂
I will say that the biggest thing preventing me from reaching my goals is coming up with new goals that are “more important” before completing the original goals.
I’ll pay Devil’s Advocate a bit and say the article isn’t as silly as you make it. When you click on the solutions to some of the problems there is some decent advice including cutting back on credit card usage, setting up an emergency fund, budgeting, etc.
Many people in their 20’s have a very poor knowledge of personal economics (hell so do many people at all ages) and if this article gets them thinking about things I see that as a positive. While the headline frames this as an income issue the article does a relatively good job talking about both income and expenses. It’s really more of a silly headline than a silly article.
Your “500g off your butt” line will be a classic.
I read your blog religiously yet I would still say I have an income problem. Being 4 years post-graduating med school and still making resident salary in a 85th percentile COL area with student loans growing. I am two short (versus long) years away from not having an income problem. But I would say I still have an income problem.
BCB- I hear what you are saying, and everyone’s situation is different – but even in your 85%ile COL area there are people happily living on less money than a resident makes. They may be commuting from a cheaper neighborhood, taking the bus, riding a bike to work, etc but some of them are saving money. I found that if I lived a little bit more like “regular people” (the admin staff, the LPN’s, etc) during residency then I no longer had an income problem. My residency was in DC which is not a cheap town. Just food for thought….