Free The Simple Dollar by Trent Hamm Page B

$457 on alcoholic beverages, and $323on tobacco and supplies. This doesn’t include the large portion of automobile expenses spent on luxury automobiles, thousands spent on luxury apparel, and the portion of housing expenses spent on excessive homes. With an average family post-tax income of only $49,638, it’s easy to see that a sizable percentage of our income is spent on nonessentials. 1

    I’ll be the last person to tell you that you should just cut all of that nonessential spending and live a stoic existence, subsisting on grass and living in a shack with only a deck of cards for entertainment.

    Instead, my argument is simple, a refrain I heard over and over again on the London Underground while on our honeymoon.
Mind the gap.

     
Mind the Gap
    The gap is simply the difference between your income and your required bills—the money left over when you’ve taken care of the bare essentials.
     
    As the preceding statistics show, individuals spend the vast majority of their “gap” on nonessential items: entertainment, dining out, alcohol, luxury apparel, luxury automobiles, extra housing, and other such expenses.

    The “gap” is also the source of our savings for the future (like the emergency fund discussed in Chapter 2 , “What’s Missing”), for debt repayment, and for other financial goals.
     
    “Minding the gap” doesn’t mean dropping all of your fun expenses and putting it all in the bank. Instead, it simply means stepping back and looking at your core values for a moment before you bust out the plastic.

    Remember that picture of your ideal future that you sketched out in Chapter 3 , “ A Visit from the Black Swan? ” The aspects of that picture—the people you’re with, the things you have, the career you have, the activities you’re involved with—details what your core values are. That picture is quite reachable.
     
    Your “gap” is your key to get there—or merely a continuation of the tired path you’re already on.

    Whenever you have an opportunity to spend some of that “gap” money, you have a choice: You can spend it on the things that truly matter to you—the pieces of that wonderful picture of your future—or on things that don’t matter (or matter substantially less).
     
    It’s much like that photograph that Marty McFly holds of his future family in
Back to the Future
. When Lorraine or George make a poor choice—even if it looks good in the moment—that wonderful future family begins to disappear just a little. When they finally choose to grab hold of the truly good thing right in front of them, that future picture fills itself in, clear as can be.

     
Wants and Needs
    Modern life muddies the waters quite a bit when it comes to smart choices with our “gap.” Marketers and social influences prey on that gap. The resultantconfusion ends with us feeling as if we “need” something that’s just a short-term want, planted by a clever marketing message.

    Amanda Schuler, a human resources worker from Omaha, NE, struggled with distinguishing wants versus needs in a car purchase: “I totaled an almost brand-new Toyota Camry. Even though I received a sizable check from my insurance settlement, I still had to go out and get a new car. As I began my car shopping, I started getting swept away by all of the bells and whistles, and the salespeople sure talked a great pitch. Instead of purchasing, I walked away. While I was at home that evening, I called my dad, and he reminded me of ‘wants versus needs.’ I wanted a brand-new sports car, but could I afford the payments? Absolutely not.” 2

    What’s the solution to this problem?
Time.
Whenever you’re about to make an impulsive buy, put it back on the shelf and resolve that you’ll buy it in thirty days if you still want it. Most of the time, you won’t even
remember
the item in thirty days, let alone still want it. If your mind keeps returning to the item during that waiting period, ask yourself why. Does it help