Are You Stretched Too Thin Financially?

Are you stretched too thin financially? The symptoms usually look like this: you feel stressed and worried, and are constantly doing a juggling act. And, no matter how much you make, it never seems to be enough.

Most of us approach a situation like that by lamenting our lack of income, the high cost of things, and the interest rates on our debts. “If only we made more money”, we think. Or, “If only we didn’t have to pay all that interest.”

So we work at making more money and at clipping coupons (without crossing the line into illegal extreme couponing.) We try to negotiate a lower interest rate on our debts, and wonder if we’d qualify for a home equity line of credit so we could “pay them off” and make progress faster.

While that may be the normal approach, it’s not the best approach.


Well, what usually happens when we make more money? We spend more money. Sometimes we even spend more money proportionally than we had been spending pre-increase, and we end up even worse off.

And what usually happens when we “pay off” debt by taking out a loan? We end up with an even bigger debt problem, because rearranging our debt didn’t change our habits.

Of course, none of us intend to do those things. We have the best of intentions, and we’re sure we’ll be the exception to the rule. But why count on being an (unlikely) exception? It’s more effective to solve the real problem instead.

That means that we have to figure out what the problem really is, and then take action based on what we discover.

Find the real problem

Start by evaluating what you’re doing right now. If you’re stretched too thin financially, make a list of what you really spend each month. Yes, that probably means you’ll need to track spending. It may also mean taking a look at your expenses and seeing if there’s a category where your spending is disproportionately high.

For example, you may have payments like these each month:

House payment, $1200.
Car payment #1, $406.
Car payment #2, $478.

Let’s say you bring home $4800 per month.

At a glance, your house payment looks like a bigger money-suck than transportation. But what happens when you add in all of the associated transportation costs? Car insurance and gas will add a significant amount. Let’s say they add another $850 per month to the total, not including things like parking, maintenance, and repairs.

That means that while your house payment may be a reasonable 25% of your take home pay — and while it will feel like a big bill — the real culprit in this example is transportation, because it’s using 36% of your take home pay without the additional irregular expenses.

Of course, your numbers will be different. The point is to evaluate them objectively and in detail, instead of just going by how things seem at a glance.

Once you evaluate, you may have to make some hard decisions.

Decide what to change

Maybe you’ll need to sell a car, and get into something in cheaper instead. (Keep in mind that not all beaters are ugly piles of junk held together with duct tape and a prayer — my 20 year old “beater” is a great car, although I did put some duct tape over a small hole in the fabric.)

Maybe you’ll have to say no to more things. If you’ll be getting a raise or a bonus, maybe it will be a matter of saying no to a celebratory gizmo or an increase in spending.

In any case, think about what you are doing that you have control over changing. That’s what will really make the difference.


  • APF

    Great post! I am a big fan of not worrying about the things you can’t change (which implicitly blames things outside of yourself) and working on the things you can (which implies looking at your own behavior).

    Tying up unsecured debt with a HELOC is a risky proposition – while it might reduce interest paid and simplify things by having one payment…I’ve seen to many cases personally where a HELOC consolidation led to an even tougher situation 12 months down the road when the credit card balances crept right back up…but now there was no equity. Why did this happen? Because behavior didn’t change, debt was just moved.

    It can be hard to look at your spending in detail and be objective about what to cut back. It also seems like a pain to add up infrequent expenses like taxes, registration, maintenance, and depreciation to your auto costs, for instance, but it gives you the real picture. And having the real picture can help you save real money. Even small steps count, though – saving $50/week is $2600 a year.

  • So true! We were stretched really thin for a long time until I took a close look to see where all our money was going. I thought that our mortgage was a big expense. Boy was I wrong. Eating out was killing us. So, after re-evaluating it all, we made some changes and now we have some room to breathe. Great post!