With the onset of inflation, many people are hemorrhaging money hand over fist. The cost of living increased so much that we have no choice but to bleed cash month after month. We can stop the bleeding by budgeting our money smartly.
It’s a real cycle. People think they have more money to spend than they do so they spend more than what they’re bringing in to fund their lifestyle. Many recent college graduates do this. They’re so used to having no money that they go all out once they actually have some sort of income!
They go out every single Friday to the bars and spend $250 on a night out, their entire paycheck for the day. Even beyond recent college graduates, millions of Americans do not have their finances in order. 49% of Americans can’t cover a $400 expense in 2022.
49% of Americans make more than enough to cover a $400 emergency but 49% of Americans cannot cover that emergency expense. What! Inflation has tightened many consumers’ budgets. However, bad financial literacy was prevalent even before decade high inflationary times.
The biggest thing to do when you are hemorrhaging money is to spend less money. Americans’ salaries are low but not so low to the point where you can’t afford basic necessities in life. There’s always a way to stop the bleeding and build wealth the slow way.
Upward mobility is not only for the select few.
What Does Hemorrhaging Money Mean?
Hemorrhaging money means that you are bleeding cash over a period of time. It could be over a day, week, month, or a year. We’ve all had those months and weeks where we spent more than our income. However, we can’t continue to keep bleeding cash every single month because that’s a recipe for disaster.
We lose money based on either a lack of income or too much spending. Americans, generally, are paid enough to raise a family and invest on the side, if wanted. When we lose that surplus and actually run at a deficit is when households are in trouble.
Hemorrhaging money is much more common than you think. Many coworkers I’ve met had a shopping addiction they couldn’t break. So they’re OK spending $500/month on things that they throw away after a couple of months. It’s mind boggling!
It’s time to break the paycheck to paycheck cycle and build real wealth. Once we build real wealth is when we feel like we can stand on our own two feet. Americans have the highest chances of becoming a millionaire. Let’s not waste the opportunity.
Everyone has a shot.
Hemorrhaging Money: 9 Ways to Stop
Below are the 9 ways to stop hemorrhaging money and take control of your financial destiny.
1) Find the Root Cause of the Problem
Are your hemorrhaging money because of a lack of income? is it too much spending? Are you keeping up with the Joneses and comparing your level of spending to someone else’s? Whatever the case is, there’s an actual cause to why you are losing money every single month.
Consumers need to treat their finances like a business. If a business loses more money than revenue, the business goes under. It’s only a matter of time before it does. The best thing to stop losing cash every month is to find out why it’s happening in the first place.
Many people get enticed by the shiny marketing. Or they get enticed because they see their neighbors buying the latest and greatest toy and think they just have to have that as well. Their story is not your story. If you don’t need it, then you shouldn’t buy it.
It’s not wise to confuse wants with needs. Your bank account depends on it.
2) Stop Hemorrhaging Money by Not Keeping up with the Joneses
The Joneses actually went bankrupt and lost their house. Even the Joneses can’t keep up with the Joneses. If someone buys a brand new car for $25k, they didn’t increase their net worth by $25k. They just lost $25k worth of cash.
There’s no need to upgrade to a bigger house and acquire more space if the numbers don’t work and you don’t need to. I personally live in a 975 sq. ft. apartment with a roommate and it’s more than enough for my lifestyle right now. I won’t upgrade to a new place, if I don’t see the need to do so.
Hemorrhaging money starts with stopping the bleeding. The easiest way to do so is to stop buying things that add no value to your life. I currently spend approximately $25,000 per year and I have no plans to increase that spending.
Even as my income grows, my expenses stay the same. That’s how I win the game of money.
3) Make More Money
The easiest way to have more money to spend is to make more money. These days, there’s an infinite number of ways to make more money. You could start a side hustle, switch jobs, or flat out get a second job. Whichever the case is, you are more in control over your income than you think.
The way to stop hemorrhaging money is to make more of it. The more money that comes in, the more you can spend. Even during defensive periods such as a recession, people are getting raises and making more money than ever before. If you are indispensable to your employer, they’ll keep you.
An extra $10,000 per year does wonders for your life. It may not happen tomorrow or even the next month. But if you start thinking in years and years is when the value trickles down. Many people are making a full time income from their side hustles in 3 – 4 years.
It’s more than possible with enough effort.
4) Desire Less Consumerism
The media loves to portray the excessive consumerism lifestyle as the model lifestyle to follow after. That’s not the case, ever. When you figure out a way to live cheaply and frugally, you become dangerous. You take more risks with your money because you don’t have a lavish lifestyle.
That’s how to stop hemorrhaging money. To stop the consumeristic lifestyle that the government and the media tells us is the right lifestyle. And start living a frugal lifestyle that gives you the freedom to do what you want, when you want it, and how you want it done.
Consumerism is one of the worst things ever for your lifestyle if you are bleeding cash and money month after month. I personally do not buy a lot of stuff year after year. In fact, I try to spend less money every single year even as my income increases every year.
Living on just enough is a blessing.
5) Delay Gratification
There are many smart, hardworking, and amazing people who don’t get far in life because they need instant gratification rather than delayed gratification. I lived on near poverty for six years straight before I spent any meaningful amount of money.
No one is willing to delay gratification for six years straight except for the select few. The ones who delay gratification to wait for the really big payoff are the real winners. It’s not necessary to have things now. There’s nothing wrong with waiting years to get the really big reward.
A dollar spent today is potentially worth $40 in the future. The ones who are hemorrhaging money are spending so many of their future dollars today. They’ll figure it out down the road whether they made the right mistake or not.
Money is the lifeblood of your life. It’s time to protect it, whenever necessary.
6) Stick to a Budget
A budget saves many from making poor financial decisions. A budget isn’t restrictive, it’s freeing because you know how much you can spend per month. It stops you from hemorrhaging money because it dictates exactly how much you can spend per month.
My personal budget only allows me to spend about $1,500 per month. That includes rent, utilities, food, and the like. I used to spend these much when I first graduated college and I lost the interest in doing so after about 5 years of work. However, the interest to save money is now renewed.
I want to save and earn as much as I can so that I can get to my financial freedom goal faster. The interest in working as hard as I can to make the most amount of money was gone. However, the bear market of 2022 convinced me that I’m far from being at the top.
There’s more game left to play for me and it’s time to practice financial discipline.
7) Educate Yourself on Financial Literacy
Financial literacy is what stops people from hemorrhaging money. When you understand how money works and what money actually is, you realize why you don’t have to lose money every single month. You shouldn’t be losing money every month.
Rather, you should be building your net worth, improving cash flow, and getting richer every day, week, month, or year. Financial literacy is the reason why millionaires exist. Millionaires don’t exist because they made a million dollars. They exist because they kept a million dollars.
Many high income earners are living paycheck to paycheck because they don’t know how to deploy their capital prudently. Financial literacy is not about making as much money as you can. It’s about keeping as much money as you can so that it eventually pays for your life down the road.
Financial literacy education is very valuable.
8) Stop Hemorrhaging Money by Automating Savings
Automating savings is the best hands off personal finance there is. When your money automatically goes into your 401k every paycheck, you don’t have to think about it for a second. Every two weeks, money goes into my 401k and HSA, to protect myself for a rainy day down the road.
If you protect yourself from yourself by automating your money, you have a chance at automatically becoming a millionaire. Without you lifting a finger. This is how you pay yourself first. By setting automations in place so you don’t have to deal with the stress of your investments.
It’ll give you a better chance at forgetting about your investments, as well. It’s a well-oiled machine that automatically builds your wealth for you without additional effort. The same goes for savings as well. When you automatically put your money into savings, it stops you from frivolous spending.
Your savings accounts are in your savings accounts for a reason.
9) Pay Off Your Debt
Debt is what prevents people from achieving upward mobility. When you pay off your debt, you free up additional cash flow in interest you no longer have to pay. People joke that they got a raise once they pay off their mortgage. They no longer have to pay principal and interest for their bank overlords.
A great way to stop hemorrhaging money is to pay off debt that’s restricting your cash flow and keep that principal and interest payment all to yourself. I paid off $15k worth of debt in January 2023 and it felt amazing. Not only is the burden off there’s no more interest payments I have to worry about.
When you simplify your finances and no longer have to care about additional projects besides raising income and saving money, your net worth skyrockets that much faster. Debt chains many Americans to their desks and keeps them working forever.
That’s not the right financial decision to deploy.
10) Cancel Unused Subscriptions to Stop Hemorrhaging Money
I get it. Many subscriptions are so cheap it doesn’t really matter whether you keep it or not. However, companies are raising prices on their subscription model at a much faster pace than ever before. Even Microsoft charges customers a subscription fee to use their Office Products.
Microsoft Excel and Word have become a necessity these days that many people are accepting the subscription model. That’s insane. I personally need Microsoft Excel but ever since Microsoft has been charging a subscription for it, I would rather not go through with the purchase.
Beyond Microsoft products, there are $10/month subscriptions that people just don’t cancel because it’s easier to just keep paying it. Netflix, Twitter, Amazon Prime, Spotify, and the like are just a few. That’s $10 – $100 per month that’s going from their pocket to companies.
That is a lot of money that adds up over time.
11) Negotiate Your Bills
If you haven’t negotiated or shopped around for car insurance, cable bills, internet, or phone, then it’s time to call and ask for a cheaper plan. If you’ve been a good customer for a year, then it’s time to subject them for renewal.
What are these companies doing to further your interests? If the answer is minimal, it’s time to cut them out. I cancelled my Amazon Prime membership because it’s gotten way too expensive. That’s $150 per year that I save because I just don’t use Amazon Prime that often to justify the cost.
I’ve been much happier for it, as a result. I still get the free fast delivery because I still buy more than $25 worth of their products at a time to qualify. Therefore, I still get the same benefit but do not pay for the membership That is straight up winning for me.
Negotiate with your suppliers and put them up for review often. They’re servicing you, not the other way around. Subscriptions are a big reason why consumers are hemorrhaging money.
Hemorrhaging Money is Bad
There’s a millionaire janitor who built an $8 million net worth because of his astute and smart money management tactics. It shouldn’t be anyone’s surprise in that if a janitor made enough money to become a multimillionaire, anyone can become a multimillionaire.
Americans make enough money to stop hemorrhaging money and build real wealth with their paychecks. The American dream is alive and well and it’s one worth pursuing. Anyone can get out of their situation as long as they want it badly enough and put in the work to get there.
There’s always a way to make more money and spend less money. The bear market of 2022 proved to everyone that the economy can turn sour quickly. When they least want it to and when they least expect it to. Everyone left 2021 richer than ever.
Then everyone left 2022 poorer than ever. When you stop hemorrhaging money, you don’t let bear markets like that phase you out. You can live on so little money that it doesn’t matter if you lose your job or not. You can always get back on your feet, whenever necessary.
Hemorrhaging money doesn’t feel good. It means you will always be dependent on someone else to fund your lifestyle. That’s not a good spot to be in. People are not going to be kind if they find out they have power over you. Bosses love it when you buy a brand new BMW.
It means you’re that much more motivated to continue working the job and help them get richer.
How to Stop Hemorrhaging Money: 9 Ways Shortlist
- Find the root cause of the problem
- Stop hemorrhaging money by not keeping up with the Joneses
- Make more money
- Desire less consumerism
- Delay gratification
- Stick to a budget
- Educate yourself on financial literacy
- Stop hemorrhaging money by automating savings
- Pay off your debt
- Cancel unused subscriptions to stop hemorrhaging money
- Negotiate your bills
