Scale Your Personal Overhead to Reduce Unnecessary Costs and Live Efficiently  

At some point during the year — or even at several points throughout the year — women in business everywhere are bragging about growing revenue, profits and production while keeping operating costs at minimal-to-no-increase. In other words, females in leadership roles are frequently showing pride creating a company or product that “scales” because revenues can be increased without increasing costs. What does this mean? We are generating demand and operating effectively and economically. We are cutting costs and gaining efficiencies both in our dollars and in our people resources. We hope to out-scale our team and grow, but we want to out-sell our competitors without increasing spend.

So…if sentences like “In the past year, we cut costs and gained efficiencies, increasing revenue by 30% on a flat budget” are said with pride in the board room, why isn’t the following phrase said with pride at moms’ night out: “Last year, we grew our family by 25% and yet cut costs by skipping the bedroom addition — and choosing stained concrete counters instead of Carrara marble.”

Keeping up With the Joneses — or Re-Scaling Your Life with Authenticity

Elizabeth Warren & Amelia Tyagi’s book, The Two Income Trap, explores how dual income households has made families more vulnerable to financial disaster than ever before. Here’s why: now that both family members are working, the extra dollars earned are going to essential items like a homes, cars and education, not necessarily to additional luxuries.  And, it is more expensive to live in the U.S. and most developed countries than ever before, so, even in a dual-income home, family members are using every bit of extra income on necessities – homes, cars, and a good education for their children.

But, a better education often times means moving to a better school district — and to live within that school district, it’s likely a more expensive part of town, therefore entails buying a house beyond ideal range — and then when living there causes a desire to purchase a newer car to fit into the neighborhood, costs out-scale incomes quickly.

Take that ideal lifestyle with the two income trap factored-in, and then imagine the plight of the single mother or single woman who doesn’t have a partner with whom to combine income, but is still held to society’s standards that are based on that ideal.  When 34% of children today are living with a single parent, many women are racing to keep up with a standard of living that out-scales her income, even if she is quite successful.  When 8 out of 10 Americans are in debt that in effect means most of us are used to keep up with the Joneses.  Typically, Americans are feeling now that debt is a necessity, but when it carries into retirement, the opportunities debt might have “afforded” us (allowing a higher standard of living) may not seem so worth it.

Reexamine the Tradeoffs and the Perception

Does your life scale?  Can you re-think your needs and priorities to bring your life back to the scale that focuses on the true “revenue” of life, whatever that may be to you?  Whether it’s material things, life experiences or vacations, or the little pleasures in life, what is important to you, and how can you bring your life into a scale that brings the most personal profit?  Here are some things to contemplate:

• What happens if you buy the smaller house?
• What if your children have to share a room?
• What if your husband doesn’t get a “man-cave”?
• Will never getting your craft room or dedicated office hurt you more than the stress of a mortgage payment you may not always be comfortable affording?
• Would it afford you an extra family vacation every year, and is that more or less worthwhile?
• Would it afford you more money put away for retirement or college funds?
• Would the stress of not having everything you want now out-scale the stress of wishing you had saved for what you needed later?
• What will your friends/colleagues/family think?
• If you have the smallest house of your siblings, if you have the oldest car at your office parking lot, how much does that matter to you?   It may matter to you quite a bit, but before you make a commitment to a new monthly payment, analyze what you may be giving up by dedicating more monthly income to one thing over your other options.

Mull Over your Choices – Then Make Better Ones:

• Have you ever fallen into an income trap that you thought would make you happy but didn’t?
• Does retail therapy work for you or leave you ridden with guilt?
• Does your daily multi-dollar coffee drink purchase ease the stress of your day, or does it add stress at the end of the month?

Many people make budgets based on income and output.  This gives you a chance to look at what you are spending, and realize your profits and losses, as follows:

• Consider looking at your past few month’s worth of “spend” and redefining a new budget after its examination.
• Add a category to that cost sheet to qualify each cost as “necessity,” “investment,” “joy,” or “none of the above.”   This allows you to drill down into each category.

Necessities Category: (e.g. car payment, house payment, other living expenses and utilities etc.):  Can they be reexamined and reduced, and still meet the requirement for your life?  Are some of the necessities part necessity, but also part joy or investment (bigger house than you truly need? Nicer car than you truly care about?)?  Analyze how that is effecting the overall cost of the essential, and how that might affect your life in the future in a negative or positive way.

Investments Category: (i.e. things you need to spend now to increase your profit in the future,  whether that be actual stock purchases, true business expenses, or even things like dressing for the job you want rather than the one you have): Are you spending the absolute smartest with them? Have these investments shown progress already?  Make a plan to track them, and review your ROI in each next year.

Joy Category: Are they truly bringing you “life’s little luxuries,” — and in how much quantity do you need that item to find joy?  Evaluate each quantity, and think about how you could potentially reduce spend there, without reducing that pleasure.  Do any of the items that bring you joy play the role of a double-edged sword and ultimately bring you grief (in other ways besides financially)? Are some of your pleasures also adding guilt or sorrow, when the joy is followed by some other result that doesn’t make you look or feel your best?

None of the Above Category:  Why are you spending on this? How can you avoid it?  What would you rather spend your income on?

Action Plan: Based on these categories, reanalyze and re-weight your budget. Would you like to spend 50% on necessities, 20% on investments, and 30% on joy?  Would you like to swing the budget further into the investment category and see what profits you can reap?  Check in with yourself monthly to see if you have followed your budget and how you felt about each category and even each individual spend.

Share your Experience and Choices

The statistics show that you aren’t the only person struggling, no matter how far your career has come. You aren’t the only person in debt, and you aren’t the only one wondering why you are still living paycheck to paycheck when your income has doubled over the last ten years.  There is an internal logic to this, however: think about the scale of your life ten years ago. Think about the scale of your life now.  Many of those changes may fall in the necessity category as you think about the changes in costs:  larger home, daycare costs, family cars and family cell phone plans.

Still, try to reimagine how you can rescale your life to meet your profit goals.   And when you make those choices and changes in your life, whether it is keeping your old, paid-off car until it no longer can take you where you need to go, or not sending your child to the private school every other neighborhood child is attending, or not spending the same amount on birthdays or Christmas as other families, be proud of them.  Don’t be ashamed.  Instead, share and proclaim the experience and the profits it afforded you. Imagine saying, “Yes, we got the kids one gift each this Christmas (under $50) and they barely even noticed after opening gifts from friends and aunts and uncles.  They all wanted tablets and might be disappointed about that, but honestly we avoided one more screen-time argument.  That money we would have spent is going into their college funds instead.”

The point is, rather than worrying about not keeping pace with everyone else, show pride in keeping your life to scale.  It’s one more way we can change the game from competing with other women, to supporting women.  And sharing a story like that might empower another woman to make better decisions and bring her life back to scale – which also brings profit back to her, her family, and all the women she might influence in the future.