pennies vs dollars

One of the hardest ideas to grasp in prosperity thinking is not worrying over pennies. It's not to say that you shouldn't be concerned with the details or that you shouldn't know where your money is going. But when people talk about getting in better financial health they talk about losing weight, cutting back.

I recently acquired a management position in a group that is dealing with a 15% debt which needs to go away. Our expenses are mostly labor and non-labor expenses are minimal. But when the staff worried that we were in debt, they talked about why we were spending money on these small things. Shouldn't we be cutting back? In reality, cutting back on the non-labor expenses and tools that we use to do our job, isn't going to save us any more money because they are pennies. And unless someone is going to quit so we can hire someone at a lower level or take a pay cut, which they're not, and at this point we're not so destitute that our current labor is adding to the debt, so cutting labor is not an answer either.

So what is an answer? Well, it's the same answer that the vast populations of third world countries say, don't stay here saving pesos, go out there an earn dollars. Go find a way to bring in more money which includes helping the staff become more efficient (like not doing extra side work they're not getting paid for) and/or creating new services from work they're not getting paid for, so it moves from being a depreciating asset to an appreciating asset for the group.

People in financial crisis are told to cut their cable because it will save $x. But if you look at their overall financial status, those $x are piddley in comparison to their debt and if that was the only thing they were cutting it would take way too many years of going without cable to cure the debt. Don't deal with the small leak, deal with the big gaping hole! Deal with the 30% credit card rate. Renegotiate the car loan. If we mapped the things people spend on to a picture of damage to a sinking ship, you could then easily see that cable is not the biggest problem right now. Bailing water at a consistent and constant rate (ie paying bills on time) and finding a bucket that you can wield is a priority. Manage the amount of water coming into the boat.

I suspect in a future prosperity book I'll write, I'll explore this idea even more.