By Wayne William Cipriano
What’s your nut?
The nut, as all business people know, is the cost of operating. For the rest of us, it is the total amount of money it takes to get over the unavoidable costs that must be paid every day, week, month, year. The nut includes the rent or the mortgage, food, taxes (sales, property, income), utilities, insurance, clothing, and so on.
The nut does not include discretionary spending, the spending we have a choice to do, like entertainment (movies, concerts, books), cellphones, vacations, restaurants, toys (for kids and the adults), Internet, etc. As you think about it, and you test your financial courage, you can even add things to the discretionary list like second cars, makeup, pets, and televisions. You can revisit items that were firmly located on the nut list (food, clothing, insurance) and look them over while asking, “How much of this do we really need?” Can food bills be lowered by choosing less expensive brands? Can insurance coverage be trimmed? How long can my present clothing last before replacement is necessary?
Once you get into it I will bet everyone will be surprised at how much “normal” daily, weekly, monthly, yearly expenses can be reduced by a “thrifty” exam. And, ultimately you come up with a spending level that is necessary and comfortable.
What’s your income?
Even easier to chart, your income is the total amount of value you take in every day, week, month, year. Household salaries, cattle sales, odd jobs payments, hobby profits, positive trades, interest, dividends, capital gains, all the money (or its equivalent) that you collect.
So, you’ve got your nut and your income. You apply a little math and the difference, hopefully expressed in a positive number, is the ever-elusive and always appreciated extra money, which can be increased in two ways: reduce your nut; increase your income. The more you do one or the other, or both, the more extra money you have.
So, what do you do with all the extra money? Depends on whom you ask. Your Dutch Uncle tells you to sock it away, save it, invest it, let it grow with interest, dividends, and the like, or at the least bury it in a jar so you won’t spend it. But what is the sense of having all that extra money if you don’t use it?
Well, your Dutch Uncle would give you the “Rainy Day Speech” about how much it will come in handy when those unexpected needs pop up: illnesses, job loss, car wrecks, and all the other unpleasant curves life throws at you that we never want to think about. When they occur you will be able to handle them without going into debt and adding another unavoidable item to your nut.
Your other uncle, Uncle Grasshopper, favors another course of action to deal with all that extra money. He says, “Party with it! You’ve earned it, you’ve saved it, now spend it! Enjoy the fruits of your labor! Burn your candle at both ends while you still have something to light it with! And do so without worrying that the pleasure you derive will be reduced when un-payable bills come due. You will have the cash to pay up.”
Somewhere in-between the advice you receive from your uncles, you will find a comfortable place for yourself. And, that comfort will be the result of having that extra money that you put aside –– when you find it.
So, what’s your nut?