The Thing We Never Talk About

Timothy Iseler: Welcome to
The Thing We Never Talk About.

My name is Tim Iseler.

I'm a certified financial planner, and I
run my own independent financial advisory

business, helping musicians, artists,
and other people with weird jobs make

smarter decisions with their money.

You can learn more at iselerfinancial.com.

If you have suggestions for things you'd
like to hear about or a question you would

like me to answer in a future episode,
please visit iselerfinancial.com/podcast.

And if you like what you hear,
you can also subscribe to my

Keep It Easy newsletter at
iselerfinancial.com/newsletter.

I write about exactly this kind of
stuff, and I share it there most weeks.

A few years ago, I started
working with a friend from my

days in the touring industry.

This person's spouse worked for a big
tech company and, between both of their

incomes, they earned in the ballpark
of four hundred thousand plus per year.

It's not bad, right?

I've never earned four
hundred thousand per year.

There was only one problem.

Somehow, despite earning all of that
money, they never seemed to have any

left over at the end of the year.

They were making a ton, But without
really understanding how it was

possible, they spent almost all of it.

Now, I'll be honest with you, this
is one of the absolute hardest

problems to solve that I encounter.

It is very, very difficult to convince
someone to reduce their spending

once they've gotten accustomed
to a certain quality of life.

When you actually look at where your money
goes, it all seems kind of important.

Your health is important, so you don't
wanna give up that gym membership.

Your kids are important, of course, so
you don't wanna cut back on all those

after-school activities or summer camps.

And your pets are important, and
the food you eat is important,

and it all feels really important.

So rather than cutting back
on spending, there can be an

instinct to rely on growing that
income to solve your problems.

And that's great.

More income is a good thing.

I don't think there's anything wrong
with wanting to grow your income.

But there's a hope that if you
earn more money, if you just work

harder or hustle more, take on more
clients, then it'll all work out.

The problem with that logic is
that it ignores what actually

happens when income goes up.

Almost everyone increases their
spending when they earn more money.

This is called lifestyle creep,
and virtually no one is immune.

It happens to people at all
ages and All income levels.

But lifestyle creep isn't a
character flaw or a moral failing.

It's just human nature.

More resources means more options, and
before you know it, that extra money has

just been soaked up by new and better
expenses than the ones you had before.

The result is that you find yourself
right back where you started,

spending right at the edge of what
you make, just at a higher level.

Even though there's more money
coming in, the gap between income and

expenses doesn't automatically widen.

I want to say this again, I think
making more money is a fine thing.

It's a fine goal to have.

Inflation goes up every year,
and so should your income.

But instead of trying to out earn
your spending, I want you to instead

think about a middle ground where
you're spending below your means

and then saving everything else.

And when I say below your means, I
don't want you to be so frugal that

life is no fun, but I do want you
to spend enough below your income

that there's something left over.

That gap between what you make
and what you spend represents

everything you can save.

You can put that money into an
interest-bearing bank account to build

short-term stability, or you can invest
it to build long-term prosperity.

Even if it's not a lot of money right
now, I promise that anything you

save today will come in handy later.

You may not know exactly when or why
you'll need it, but you'll feel like the

smartest person in the world when the time
comes and you know you have it covered.

So if you're spending
everything right now, start with

something really manageable.

Could you save $10 a week or $100 a week?

$100 a week works out to 5,200 per year.

It's not a ton of money, But it's
better than spending everything and

living paycheck to paycheck constantly.

Pick A number that you think you
can work with, that you think you

can stick with, and start there.

And once you've built the habit, see if
you can increase that number over time.

The key is to move in the right direction,
even if it's just a little bit at a time.

Then when your income does increase,
I want you to be very intentional

about how you use that extra money.

Instead of using it all to buy nice
things, you could split the difference.

Use some of that money to make your life
nicer right now, and then shove the rest

into your savings or investment accounts.

That way you get a small dose of
lifestyle creep while still doing

the right things for your future.

Here are some techniques that
have worked really well for my

clients and in my own life for
making it easy to save extra money.

Number one, automate transfers
up to your invisible number.

This is a term I made up for the amount
of money you could move out of your

checking account without even noticing.

I like to tether it to something you would
buy without thinking twice about it, like

the price of a cup of coffee, for example.

If five dollars per day moved from
your checking account to your savings

account, would you even notice it?

Probably not.

Your invisible number is the most you can
save or invest on a regular basis without

it impacting your quality of life, and
it's often much higher than you think.

Pro tip there is to automate it
so you're removing the decision.

Number two, set a maximum
target checking account balance.

Your checking account should only
be used for expenses that you will

incur in the next one to two months.

Above that, you should just move
everything else into a savings account.

Number three, build up an emergency
fund, or if you don't like that phrasing,

think of it as a sunny day fund.

This should be at least enough to cover
three months worth of expenses, but for

people with irregular up and down incomes,
you should aim for more like six months.

Some very conservative people might
even like to see one to two years

worth of expenses in a savings account.

That's totally fine.

But beyond that, extra cash
is not doing you any good.

You should invest it instead.

And number four, remember to split any
future increases to your income between

spending on quality of life right now
and saving for quality of life later.

Again, without knowing anything about
the future, I can promise you that

you'll be glad you set that money
aside when you inevitably need it.

The goal here isn't to deprive
yourself or to squeeze every

dollar until life is no fun.

It's to create a gap between what you
earn and what you spend, and then increase

that gap whenever your income goes up.

The amount you save now will
give you more and better options

down the road, and future you
will be so happy that you did it.

That's it for today.

Next week I'll be talking with
producer Katie Cunningham.

Katie left her corporate job around
four years ago to strike out on

her own as a freelance producer
of everything from commercials to

events to her own narrative work.

She also launched a new framework to
help her direct the kind of energy she

brings to her work to her home life,
which she calls Produce Your Life.

We had a great conversation about
self-identity around money, investing in

yourself, in your own future, and how to
set up frameworks to keep your life on

track when you have an unconventional job.

I hope you'll join me back here
next week for my conversation

with producer Katie Cunningham.

The Thing We Never Talk
About is for educational and

entertainment purposes only.

It's not legal, investment, or tax advice.

People on the show, including myself,
may have interests for or against

any investments discussed, so do
yourself a favor and don't ever make

any investment decisions based on
what you hear on this or any podcast.

If you like what you hear,
please like and subscribe to this

show wherever you get podcasts.

If you have a money or a finance
question you would like answered

in a future episode, please visit
iselerfinancial.com/podcast.

And you can get my insights on money and
more delivered directly to your inbox by

subscribing to my Keep It Easy newsletter
at iselerfinancial.com/newsletter.

Thank you so much for listening.

I appreciate you