A while back I wrote about Running Your Household Finances as a Small Business. In the post I discuss the goal of a household like a business is to have revenues greater than expenses in order to generate a profit aka “the Gap”. Ever since writing that I keep hearing Mind the Gap (audio) in my head and the concept deserves further unpacking.
Besides being the title of a fair rated 2004 movie on IMDB, Mind the Gap is far more widely known as the (in)famous message on the London Underground. The message first appeared in 1969 and serves as an audible or visual warning to passengers to watch out for the open space as they are stepping between the station platform and the train door.
Your Friendly Reminder: Mind the Gap
For me it also serves as a friendly (or potentially testy) reminder about watching those small or frivolous expense items in the household spending. You know those purchases just because I feel like, I don’t have time so I’ll buy it, everyone else is doing it, why not, and the like “justifications”. Without minding the gap (household profits) no progress can be made toward financial goals. (I define the Gap or profits as what’s left over after the expenses are spent from the revenue pool and before investments and savings.)
Without a positive gap there are no savings and no investments for your future financial self. As in no emergency fund, no workplace retirement savings, no non-qualified savings. Instead there is living paycheck to paycheck. In addition, there is time passing with no seeds planted for your long term financial goals. Everything positive starts with positive household profits.
There are only two variables at play with realizing household profits. Revenue and expenses.
As far as revenues, it is harder to turn up the revenue dial in the short run. Yes, there are opportunities like side hustles, seeking new jobs with greater pay, or having a spouse find employment. These are positive and smart activities. They just take a little longer. That fact puts more immediate focus on expense management.
The expense side of the equation is much more controllable in the short run AND the long run. In the short run there are opportunities for taking charge around daily/weekly spending decisions around food, clothing, entertainment, travel, and the like. In the long run, you have better chance to influence expenses for housing, cars, commutes, and where you live.
The Margins Matter: Mind the Gap
Since revenues are harder to move, expense management becomes highly influential on a positive Gap at the end of the month. The days go quickly and many times spending goes right along with that. “Remind me what did we do last weekend?” and “how did we spend all that money last weekend” become unconscious facts of life. I know it’s so easy to think this “little” expense doesn’t matter and that “little” expense doesn’t matter, but it all does matter. The spending without intention and thought can quickly escalate the monthly budget outcomes to no gap and negative gaps, so Mind the Gap (audio).
Tracking Your Future
How do shift the habits? For me it really helps to track my spending and I’ve used Quicken for a long, long, long time. I used to do this in fearful, angsty, and clenching ways. Over the years I’ve learned to relax more about things. Now I use this like a mileage signpost on the highway. A way to gauge the speed of the month and take corrective action as needed. I throttle back spending if I get out of the gates too fast in a month. However, rarely do I say gosh I need to go spend more money. That’s because if I’m low on spending I want to maximize the Gap for the month!
If you don’t currently track your spending, subscribe to The Road Today blog and receive an Expense Tracker spreadsheet. It’s a quick and easy way to take a solid step to understanding where and when you spend your hard earned monies…and a positive tool to Mind the Gap (audio). I recommend tracking every penny spent for a month. Then you can review the total picture and decide what changes you may or may not want to implement going forward. You can take control of building a positive household profit.
Thank you indulging my repetition on the theme of Mind the Gap (audio). Maybe it becomes a little reminder mantra.
Community Conversation Questions:
Please share some of your thoughts, stories, and perspectives around those “unseen” expenses in your life.
- What are examples of small and frivolous purchases and expenses that you’ve experienced?
- How do your emotions play a role in “justifying” things or causing negative reactions?
- What makes it hard or easy to make a shift in your daily intentions and habits?