- The process of elimination can be very helpful for solving problems when you’re going through transition.
- In money, focus on the basics—cash flow, balance sheet and taxes.
- Focusing on cash flow, balance sheet and taxes can help you eliminate choices that don’t make sense for you.
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I just finished reading The Martian, the book on which the new movie is based. It’s about an astronaut who is left behind on Mars with only enough food, water and air to last a month. Since he doesn’t know exactly when he’ll be rescued, he needs to eliminate everything but those three key elements and focus on his survival.
The book got me thinking about the process of elimination and how it works with our money. The astronaut in The Martian is a botanist and engineer. He’s very knowledgeable about H2O, O2 and food. By understanding how these elements work, he can solve problem after problem through the process of elimination.
I find that when we’re going through tough transitions in our lives, the choices and adjustments can be overwhelming. It’s very important to be clear-headed at these times, and focusing on the basics can really help you eliminate options that don’t matter.
In space, the basics are H2O, O2 and food. In money, the basics are cash flow, balance sheet and taxes. At various times in your life, you’ll be going through tough transitions—your first job, getting married, having a baby or buying your first house, plus health issues, deaths in the family, retirement and more. A lot of new things are thrown at you during these transitions, and it can seem overwhelming. Again, go back to the basics.
Let’s take buying a new house. You really want that $500,000 house, but after looking at your cash flow you realize it’s too expensive. There’d be too much money going out the door with that mortgage payment to pay for everything else you need. That’s a recipe for disaster if you’re not careful. Set more realistic expectations. Next look at your balance sheet. Do you have enough assets to get the loans you’ll need? Finally, look at taxes, because many things that we own have tax implications when we sell or buy them.
By focusing on three basic elements—cash flow, balance sheet and taxes—you can make smart choices and eliminate options that don’t work for you. It will prevent you from feeling frustrated, powerless and confused about everything going on in your financial life.
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Until next time, enjoy. Gary
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