One thing we’ve learned over the past five-odd years – roughly the length of the economic downturn – is how to cut back. Some people cut back because they lost jobs or didn’t get expected raises or bonuses. Others cut back because their investments weren’t returning as expected – weren’t returning much at all, in fact.
Elly and her husband fall into the second category. As she says, low interest rates are great if you’re borrowing money; not so great if you’re living off your money – and the interest it generates. They cut expenses in a major way as a result, moving to Charlotte, NC from Boston, where the cost of living is lower.
Part of making big cuts – whether that means moving as Elly did or simply dropping your cable subscription – is learning to appreciate what’s left. Here’s how to do that:
Look on the bright side. When Elly described Charlotte, she didn’t even mention the lower cost of living – she talked up the weather and described her new city as a “kinder, gentler” area. Yes, it’s cheaper, too – and that’s great. But focusing not only on the extra money in your pocket but also on the new things you like about your situation will go a long way. You didn’t give up cable. You gained more free time.
Prioritize. When I’m making cuts, I like to go from small to large. Get rid of the little things, the ones you won’t notice after a week or two, first. It will soften the sting. But sometimes, it’s easier to make a big change if you’re willing and flexible like Elly’s family is. Moving to a cheaper area can allow you to keep all of the daily comforts you’re used to. That’s a shiny silver lining.
Just try it. Elly and her family moved to Charlotte to explore – they weren’t set on staying, but they figured they’d dip a toe in the water and see what they thought. It’s a way to ease into a situation; a change feels easier if you’re not committing permanently. Moving, of course, can be expensive, and you don’t want to waste time and money packing up if you haven’t done thorough research. But there comes a point when you just need to jump in and see what happens.
Make it temporary. Most of the time, a financial scaling back is short-lived. Yes, changes you make may be permanent – it doesn’t seem like Elly is thinking of leaving Charlotte – but the circumstances that caused them often are not. So maybe you’re drawing a small amount from your investments now while interest rates are low, or you’re chopping expenses because you can only find part-time employment. Neither situation is likely to last forever. Make a plan to revisit your financials in six-month intervals.