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When Income Doesn't Match Outflow

Updated: Jul 18



My son recently called to tell me he went to renew the lease on his 2-bedroom apartment and was told the rent was going to increase by $500 a month. Just three years ago, an apartment in the area where he lives would have been around $900 a month. It is now going for $1700 a month. My son and his wife started looking for another place to live with more affordable units but discovered most places have jacked up their prices. Complexes whose prices have not risen have no openings. According to Apartment List, rental prices in 2021 rose 17.5%, and so far in 2022, prices have risen another 5.4% over last year.



The economic changes over the last few years have created some very challenging situations for individuals and young families who are trying to establish themselves. During the years when they should be thinking about and planning for how they are going to get ahead in life, they are instead overwhelmed by worries about how they are going to simply survive. For Americans who earn under $100,000 a year, 67% report they are living paycheck-to-paycheck. The added stresses of unpredictable paychecks due to COVID outbreaks, the cost of gas doubling in a matter of weeks, and the disruptions at the grocery store with inconsistent supply and huge markups on food basics are upending the already delicate balance of paycheck-to-paycheck living.

So, what do you do when the money you are bringing in is not great enough to cover what you are paying out? If you do a Google search, there are all kinds of articles advising different life hacks that can help you get ahead in challenging economic times, but the truth is, there are really only 3 solutions.

1: increase your income

2: decrease your outflow of money

3: have a combination of increasing income and decreasing outflow.


Money experts have developed a word to describe these three solutions; they call it “budgeting.” Budgeting is simply the decision-making process of determining how you are going to use your money.


If you are using money, you are budgeting, whether you are aware of it or not. If you decide to put all your money in a savings account and never use it, you have made a budgeting decision. If you go through Starbucks every morning on your way to work to pick up your favorite Grande Cinnamon Dolce Latte ($4.42), you are making a budgeting decision. Whether you sit down and figure out how your money will be used each month or have no money management plans, you are still using money, and that equals being on a budget. The only difference between planning and not planning is when you plan, you are the boss of your money, and when you don’t plan, your money is the boss of you.


If you are not in the habit of making a plan for your money, you are more than likely experiencing more stress, money anxieties, and the inability to make on-time payments on bills. It is not difficult to take charge though. The first way to take control of your money and start intentionally planning a budget is to actually be aware of how you are spending your money. By being aware, I mean knowing how much you have spent in a month on that Grande Cinnamon Dolce Latte (5 days a week for 4 weeks at $4.42 is $88.40 a month on coffee), and then knowing that your bank charged you an insufficient funds fee because your automatic payment for your car loan went through after you bought that Latte on the morning of the 15th. If you are cringing right now because that has happened to you, relax- it has happened to everyone. Why do you think banks charge fees?


Being aware is different from making judgments. For example, knowing you have been charged an insufficient funds fee is being aware; cringing over the insufficient funds fee is a judgment about how you “should have” behaved. Many people avoid looking at how they spend their money because they don’t like having to hear the voice in their head that I call the “shoulda-coulda-woulda voice.” This is The Voice of Judgement.


It says, “you shoulda been more careful with your money this month!” or “you coulda bought a tank of gas with all that coffee money you are spending!” or “it woulda been nice if you had remembered that your car payment comes out of your bank account on the 15th!” When you look at your bank statements and see the ways you are spending that are interfering with your ability to buy groceries or gas or pay the power bill at the end of the month, it is easy to slip into self-blame, self-punishment, shame, and guilt modes. In those moments, it seems like life is a lot more pleasant if we just avoid looking at how we spend.


However, to move beyond the stress and anxiety of not knowing how you are going to do things like afford to pay for housing, you have to set aside the “shoulda coulda wouldas” and replace them with the Voice of the Detective.


From this place, you look at a bank statement as an interesting document that can give you insights into how your money is operating in the world. As a detective, going over a bank statement can be likened to going through a person’s garbage to find important overlooked clues. Yes, looking at your bank account may feel as repulsive to you as going through your garbage, but it can also give you some really valuable clues about where your money is going, what is important to you, and how you choose to use money. You may discover that coffee is as essential to your life as buying gas for your car. If so, you have the choice to make sure that you have $90 a month in your budget for coffee. There are no judgments about “that’s too much to spend on coffee”, but instead, “I know this is what I will spend in a month, so I am going to make sure the money is there for that.”


Realize though, that this decision may mean that you have to let go of something else. A budget, whether it is planned or not, is based on a finite number. You have X amount of money available to spend in a month, and therefore, you can only spend that much. This is where planning a budget becomes beneficial. When you don’t have a plan for how your money is going to be used during a month, especially in times of economic hardship, it is easy to spend into the future, using money you do not yet (or may never) have. My father called this “borrowing from Peter to pay Paul.” If your bank account is in the red or you are borrowing from someone else (a friend, family, or a credit card company) to purchase something now, you are spending into the future.



Being aware that your spending is based on your income alone, and not on what you can also borrow from someone else can be a painful thing, because it may require you to- to borrow a saying from my dad again- ”tighten your belt.” “Tightening your belt” means that you may have to decrease spending- eat less, go out less, play less games, use less electricity. However, tightening your belt is far less painful than having to pay the bank’s insufficient funds fees when you barely have enough to pay your regular bills or being evicted from your apartment because you fell too far behind in payments. Or, in the longer run, being unable to buy a car or a home because your credit is bad from too much debt or too many late payments.


By doing a budget, you have the power to determine what it is you need to pay for (food, water, power, shelter, clothing, medical expenses, phone service, transportation expenses, money into savings for emergencies) and then decide how you will use whatever money you have left over for what you want (daily Grande Latte? Having restaurant deliveries to your door? In-game Fortnite purchases? Disney + subscription? New rims for your car? Money in savings to build a down payment to own a home?). At the end of the month, by making decisions about spending based on what you know rather than based on ignoring your financial situation, you will come out with a bank account that is not overdrawn. You will experience fewer feelings of guilt, anger, frustration and anxiety over money, and you may also feel less of a victim of the current economy.

In creating your budget, you also have the opportunity as a detective to determine if you need to increase your income or if there are ways you can decrease your outflow. In future posts, I am going to offer some tips on decreasing the amount of money that flows out of your budget, discuss what to do when you have short-term income shortages, and talk about how to decide when more income is needed.


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