Reduce Your Burn Rate: While creating multiple income streams is one path toward making ends meet, there’s another aspect that involves managing that income. We call it “Reduce Your Burn Rate” of our money.
Reduce Your Burn Rate to Get Off Treadmill of Debt
Today many of us live in a society that is based totally upon debt…debt created out of thin air, to be used by the government to finance our massive consumption addiction. Additionally, debt is created to “help” us to contribute by buying more and more. Even though we have no way to pay it back. Even though we really don’t need this. Essentially, our economic system has been creating and fostering a race of “debt slaves.”
Those who have student loans, which cannot be forgiven even in bankruptcy, understand the burden this places on us. We are taught to go into debt…and we are taught that it is a good thing. Go into debt for your house, three cars, education, clothes, appliances, vacations–everything you want you should buy, because you “deserve” it. But it is all a sham. A racket. A Ponzi scheme to keep you in debt and under the control of your masters: the bankers and politicians who are the ones doing well in this system.
In fact, the only consideration is that you make all your monthly payments, because if you don’t, your credit will tank, the world will end for you, your firstborn will be taken as a sacrifice, and of course the all-important credit rating will take a big hit. Some of our lawmakers want to have both SPENDING CUTS (reducing burn) and TAX INCREASES (providing more income). Personally, in our own life we are looking for both a BURN RATE DECREASE and INCOME STREAM INCREASE.
So what can we all do to get out of this ‘rat race’? How do we get off this treadmill that has no end in sight?
In our Making Ends Meet on the Farm series we’ve been exploring options for creating a rural lifestyle that serves us instead of us serving it. Instead of CONSUMING MORE, or even continuing to consume as you have been, try changing your lifestyle and REDUCING YOUR FINANCIAL BURN RATE. That’s it. Sounds simple, right? It is one of the secrets of making ends meet. So why don’t we do it?
I suspect it is because we are constantly bombarded with the consumption message by all media, which is being shouted to keep a dying system alive. I also suspect it is just “easier” for us to keep doing what we are doing.” That is very normal human behavior. But as we refuse to take part in that and resolve to change, this step alone will bring huge rewards. It is tax free. It is simple, but not easy. It requires a real mindset adjustment, but it brings huge rewards.
Here are some simple steps to move in the right direction, and we would love to hear other ideas you might have that have helped you in this regard.
Get out of debt.
I mean all debt. No more car loans, credit card debt, student debt, and ultimately mortgage debt. There are plenty of programs to help you. Stop talking and thinking about it and get started doing it. Don’t by another thing on credit. If you don’t have the cash, don’t buy it. I would encourage you NOT to use your credit cards. Usells your debit or pay cash. I pay cash now.
It is amazing how my spur-of-the-moment whims to buy even the smallest things are thwarted when I have to take actual money out of my wallet to pay for it. Yes, this is a process. But if you stop the accumulation, it is amazing how fast you can whittle it down. When you have do debt, you don’t need to earn an income that is taxed 50% by everyone in order to make a monthly payment.
Here’s an exercise you can do for yourself. Look at your monthly bills, add them up and get a total. Then cross out all of the payments covering debt. How much income would it really take to live if you didn’t have those payments? This is an amazing and eye-opening revelation. To get out of debt, stop buying anything you really don’t need to have. Don’t listen to the hype of the media or your past way of thinking and buying. This is a time to actually begin your lifestyle transformation by “reducing your consumption and monthly burn rate.”
So what will this look like? Look at your budget (if you don’t have one, make one). Take each part of your budget and decide what you can eliminate. Cold turkey. If that is too drastic for you (and of course this is your life and decision!) then just scale it back.
Some expenses to reconsider
If you have a smartphone, do you actually need it? Sure, it is nice to have a phone that makes maps and such, but do you need it? One family I know has a smartphone for each family member, with a monthly bill of some $400. Unbelievable. Do your kids REALLY need cell phones for texting all day? Are we living in the past if we don’t have all the bells and whistles?
No. I am refusing to pay, on a monthly basis, through the nose for stuff my family and I don’t need. Is it hard to change? Yes. This goes back to exercising your options by deciding to change.
In our family we have cell phones. But we do not subscribe to “data” and we have a reasonable bill. Another family with five kids uses a phone provider that allows you to pay on a minute basis. They don’t use enough minutes to require a large plan. The teenagers have phone that are used only for emergency purposes.
The elementary children don’t have phones. Are they deprived? I don’t think so. The family reduced the previous bill by nearly two thirds. Chances are you could save a bunch too.
How many cars do you really need? Each has to be maintained and insured. Must they be really new? They should be reliable and gas-friendly. But most of all they should be debt free. Pay off the loan, and then put money aside for the next car. Amazing how much is freed up with no car loan to pay.
This is certainly a personal choice. Some families have chosen to eliminate this all together and rent movies or go digital by streaming TV and movies from the internet. What works for you?
If you have a student loan, you will ultimately have to pay it back. If you don’t have any, don’t get any. This discussion has ramifications for so many of our younger folks. Interestingly, the cost of college has increase FASTER than that of healthcare. Education is now considered a bubble, as many are not seeing the benefit of a college degree when compared to the associated debt (creating debt slaves) required for that degree.
Again, it’s a very personal decision, but while it was routine in days past to go to college, I challenge that in today’s economy. Higher education is a very important priority to many, and I don’t resist that. But to go into perpetual debt at such a young age for some degree that is not useful makes no sense.
This one is simple: don’t buy on credit unless you can pay it off immediately.
If you are repaying debt, drastically limit entertainment costs. If you’re out of debt, set a budget for it, and pay cash. Always think twice about that latte, movie, or dinner. I don’t think entertainment always has to be at a nice restaurant, or even at an establishment where I have to pay for it.
This reminds me of some Christmas mornings where kids, after opening presents, start playing with sticks or other things. We really didn’t need all those toys, did we? That goes for adults too. Just be disciplined and enjoy life as you decide.
We need clothes. But how much clothing is necessary? How many suits can I wear? How many types of shoes do I need? I would follow the pattern of making purchases with cash. When you start handing out $100 bills for a pair of tennis shoes and the latest fashions, you might think twice!
This is a simple one. And you might need some help. Learn to cook GOOD food. Fresh ingredients, cooked well, taste better and have more nutritional value than prepared food. A homemade pizza is MUCH LESS EXPENSIVE than the readymade one you buy at the store or have delivered. Cut back on pre-frozen foods, and learn to freeze your own. Of course, you save significant $$ by growing your own food. There is potential to cut over half of your food budget.
Of course there are other categories where you can cut costs. The key is to ask yourself and your family: What do we really need? What can we do to REALLY cut our personal monthly burn rate?
How committed are you to put your family in a position to enjoy a rural lifestyle AND make ends meet? It’s not all about earning and getting money; a major part is reducing your routine burn rate. Do some “what if” analyses. How would your budget look if you adjusted each of these items above? How about cutting back in other areas? What if you eliminated all your debt? How much do you REALLY need, then, to make ends meet?
More tips for reducing your burn rate
Create a budget and stick to it
Yes, it’s the dreaded “B word.” Some of us love the security of budgets, while some can’t stand the limitations. But there just might be a budget that you can live with.It may involve multiple bank accounts, cash envelopes, or other clever ways of managing money and sticking to predetermined spending boundaries. Need help understanding or creating a budget?
Evaluate new purchases and upgrades
Sometimes we think we just have to buy something new or upgrade to the latest version. But often it’s really not in the best interest of the family budget. Here are some questions to ask before making a purchase or committing to a higher rate for a service.
- Do you really need this, or is it an optional item?
- When you look at the product or service carefully, is it something you genuinely want?
- Will this require you to eliminate or trim down another expense?
- Is there another less costly way to meet the need?
Save money instead of spending it
Anytime you save money, you are improving the income vs. outgo ratio, making your income go farther. Many stay-at-home moms can manage their families on one income only because of their mindset to “stay home and save money” rather than “go out and earn money.”
This concept can work on the farm also, with one person working off the farm and another tending home, livestock, and garden–doing lots of home and farm tasks that ultimately save money. Don’t believe it can be done? Read How to Save $1,000 in One Month–and look at all the other ideas in the reader comments!
DIY: do it yourself
DIY can save a lot of money. But it is not always cheaper, especially when you figure in the value of your time. Either way, it can result in a longer-lasting item or repair–not to mention the personal satisfaction of a job well done. Consider these ideas:
- cooking from scratch
- making repairs
- making do and repurposing
A word of caution: Know your limits…and when to call in a professional!
Exchange products and labor instead of purchasing
All of us have probably done this in some shape or form. It’s really just using products or services as currency rather than coins, paper money, debit, or credit. There’s casual swapping of time and materials among friends and neighbors: trading, helping out, the “barn raising” concept.
There’s also formal bartering with individuals or businesses, whether or not they promote or advertise it. You might be surprised to find a small business or mom-and-pop store open to bartering. We talked about bartering in this post in our Beating Food Challenges series.
Making Ends Meet on the Farm: The New Normal
Making Ends Meet on the Farm: Normal Redefined
Making Ends Meet on the Farm: Multiple Income Streams
Making Ends Meet on the Farm: Financial Assistance
Making Ends Meet on the Farm: Reduce Your Burn Rate
Making Ends Meet on the Farm: RLT Readers’ Roundup
Working Remotely Doesn’t Have to Mean Working from Home