intentionally difficult

I honestly don’t understand the phrase “I am on a fixed income” when spoken by retirees. Isn’t anyone drawing salary from a full-time job also on a “fixed income”? Unless I receive an internal or external promotion, which typically occurs in the academic world only in the summer, my own income is fixed for twelve months at a time. I could take additional hours — over the years I have been paid for tasks such as teaching, consulting, and delivering speeches — but my current year-round roles already occupy my mornings, nights, and weekends well beyond nine-to-five Monday-through-Friday. Pensions and salaries are both subject to fluctuations: neither one is entirely guaranteed, nor guaranteed to keep up with inflation. In summary, because I don’t draw an hourly wage, have a job that consumes most of my time, and don’t live off investments or on commission, I consider myself to be on a “fixed income” too.

People who say “I am on a fixed income” generally use the phrase when their expenses closely match or exceed their income. They receive an income that is less than when they worked. In addition, they depend upon passive investments, which may lose value, or are drawing down their net worth, which may not last through the uncertainties of personal emergencies, market fluctuations, and longevity. The issue is not that they are on a fixed income. It is that they have little margin of error in the face of substantial financial risks.

One day I hope to retire. To minimize future worries, the plan is to build a large nest egg, by spending less than I earn in order to save the difference. The standard advice is to keep a budget, but I know from personal experience it is one thing to make plans and another thing to execute them. Success comes from a combination of having a firm vision and then maintaining good habits that will move you in that direction.

Therefore, I make it smooth to save money, by automating certain tasks, such as placing money every month into my 403(b) retirement and the children’s 529 educational accounts. This is pretty common financial advice: pay yourself first, put money into savings accounts before you even see it, and so forth.

In addition, I do something I haven’t seen financial advisers mention: I also make it rough to spend money. I keep close track of the items that I purchase, including when and from where I ordered them, when I received them, how much they cost, what discounts I applied, etc. I do this not only with durable goods like clothing and games, but also with consumables like groceries and vitamins. This process is annoying and takes time — which is to say that it makes me less inclined to spend money and slows me down. It goes hand-in-hand with my inclinations to make lists, to shop for the best deals, to ask myself whether I really need something, to wait for the best prices. In addition, at the end of every month I pay each credit card bill manually. I don’t have the money transferred automatically from checking, because that would be easy. Instead, I directly observe how our overall spending varies with the different cards, which provides a rough idea of how much we spend in various categories. I record these amounts every month in a spreadsheet, allowing me to track spending trends and to clearly see the amount in our reserve account.

I avoid subscriptions. We have never had cable, although we now stream Netflix, Amazon Prime, and Hulu. I keep my cell phone and tablet data plan on a prepaid basis. I do pay certain bills automatically, such as insurance and utilities, because those amounts are the same every month. And I go on partial holiday of tracking expenses whenever I travel, which is one of my fondest pleasures.

Overall, I do make it as frictionless as possible to save money, and difficult to spend money. This system works for me, and maybe some variation of this idea would serve you well too. At any rate, it’s worth considering, in different aspects of life, what to make easy and what to make intentionally difficult.

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