The concept of spending less than you earn seems extremely simple. Know how much you earn. Spend less than that. Unfortunately, for many people, it just isn’t that obvious.
Instead of spending less than they earn, many people are taking out debt to spend more money than they have available today. Debt destroys your financial future.
You have to live with the future you regardless of what financial choices you make today. Wouldn’t you rather live with a wealthier future you than a financially frail future you?
I want to live with the wealthier future me. That’s why today’s financial rule, spend less than you earn, is so important.
So, how can you avoid the fate of the typical person and spend less than you earn to build a wealthier future you?
Step One: Figure Out How Much You Earn
The first step of the spend less than you earn rule is easy to figure out. Simply pull together all of your bank statements for the last few months and add up all of the deposits each month. This is your monthly income.
You’ll want to adjust out any unusual income, such as bonuses or gifts, to make sure you’re not including them in your budget. You can’t rely on these unusual income sources in most cases, so don’t set yourself up for failure.
If you don’t have a stable paycheck, take the last few months income amounts and figure out an average income that you can depend on. Eliminate the amazing months and don’t count the awful months either if they’re outliers. This will help you estimate the income you can realistically expect in a typical month.
Step Two: Come Up With A Spending Plan
You don’t have to have a hard-line budget to make this rule part of your financial plan. Instead, simply make a basic outline on how much money you’ll spend each month. The key is making sure that your monthly spending is less than the amount of monthly income you’ve identified in step one.
If you just can’t seem to make it work, chances are you aren’t trying hard enough. Lucky for you, there are only two options to adjust to make the mantra “spend less than you earn” work for you and they’re both easy to understand.
Make It Work By Spending Less
Spending less is the easiest way for people to reduce their spending to less than they earn. It is easy to simply make a decision to cut the cable cord or dine out less frequently. Start by eliminating the expenses that provide little to no value to you. If you’re stuck and can’t think of any ways to save money, I have complied a list of over 123 ways to save that you can check out.
Make It Work By Earning More
Earning more money is a method that very few people ever attempt in order to satisfy the spend less than you earn mantra. There are many ways you can increase your income beyond simply getting a part time job or working more overtime at your current job.
You could start a side business after work or start a freelance service that allows you to work flexibly in your spare time. The opportunities are endless if you just think a bit outside of the box. My favorite reason for increasing your income is that it has unlimited potential, while cutting expenses can only take you so far.
No matter how impossible it may seem, you have to find a way to spend less than you earn. As you can see, there are many options available to you to make it happen. All you have to do is put your full effort into spending less than you earn and you can make it happen. Your future you will be happy that you did.
Unfortunately, personal finance isn’t as easy as just spending less than you earn. Stick around and explore our site to learn about more money rules that will help you succeed financially.
When did you figure out that you have to spend less than you earn? Did you start cutting expenses or did you increase your income above your spending level? Better yet, did you do both? Let me know in the comments below!