Recently, I’ve had several conversations that share a common theme: A year ago, they were fine. They didn’t have a significant financial margin in their budget, but they weren’t stressed either. Financially, they were comfortable.
But then, something changed.
They didn’t lose their job, and they did not have a reduction in income. They didn’t add anything significant to their budget, and they were not hit with any big, unexpected financial expenses.
Yet, they were financially stressed. Recently, their finances seemed to be crumbling apart.
What happened?
This now common situation is fairly easy to diagnose. Here’s why many individuals and couples are feeling financially stressed today. Maybe you can relate.
1. Your standard of living has remained the same.
Often, this is considered a good thing, especially if income is increasing. In the United States, we regularly pursue a standard of living that is beyond our financial means. This results in significant debt and limited savings. But in these recent conversations, they reported their standard of living wasn’t beyond their financial means…until suddenly it was.
2. Your purchase routine has not changed.
Many of us have purchase routines. We purchase the same amount and types of groceries each month. We have our kids participate in the same sports each season. We get haircuts at the same place and around the same time since our last haircut. We have developed a well-worn financial path to follow. It’s easy and helps us limit the number of decisions we must make. And like the prior reason, this was true for most of those whom I met. They had not increased their spending in any area. They were buying what they had always bought in the past.
3. Your income has remained constant.
In anticipation of a recession, many organizations have either frozen pay or provided a slight year-over-year increase. They paycheck you receive now is roughly the same you were receiving last year. Again, this was true for those whom I met.
In the recent past, these three reasons would not have created financial stress. In prior years, not increasing your standard of living and maintaining purchase routines was likely a financially wise decision. But this is not true today. A lack of change in these three areas are resulting in financial stress.
Why?
4. Inflation has increased the cost of your living standard.
This is why you suddenly woke up financially stressed, when everything was fine last year. Inflation has gradually increased prices over the past 12 months. At first, the pain wasn’t as significant, in part because of stimulus checks but primarily because an initial 1% increase doesn’t impact the budget as much as an 8% increase. But now you definitely feel inflation’s impact. Remaining the same has created a problem.
So, what should you do? Simply put, you must change your financial plan. Here are a few suggestions:
1. Consider what you really value and enjoy. You will need to reduce expenditures. Many of us spend a lot of money on items and services that mean little to us. Identifying what you really value and enjoy will help you target lesser valued expenditures.
2. Review past month’s expenses. You need to get a good grip on what items and services currently cost. This will help you with the next suggestion.
3. Craft a new, zero-based budget. New spending routines must be established. You can no longer rely on existing spending habits. Create a new budget and keep track of your expenses.
4. Adjust to a new standard of living. More than likely, you will need to reduce your current standard of living. To adjust, focus on what you do have, not what you do not have. And keep an eternal mindset. Remember, this life is just a blip on the eternal timeline.
5. Stay generous. Continue to live and give generous. According to Scriptures, generosity is our financial priority and allow us to take hold of what it truly life (1 Timothy 6:19). While reevaluating your spending, don’t neglect your generosity.