Great Savings 42 – Spend Less Than You Earn

 

Want a simple formula that guarantees a way to get ahead? This formula is so straight-forward few people ever see the incredible potential built into it. In fact, those who use it on a daily basis can almost guarantee their personal financial success. But we warn you: Even though the formula is simple, applying it takes discipline.

 

Think about your income for a moment. What’s the first thing that happens when you get paid? If you’re like most people you immediately start spending the money in your head. You picture bills coming due, groceries you need, a rent or utility payment coming up, or perhaps buying that big screen TV you’ve wanted for months.

 

We all start paying the bills we owe the minute we get paid.

When you get paid do you start divvying up the money in your head?

 

Spending money by itself isn’t bad. We all spend money. It’s a part of life. Yet the hard truth about money is no matter how much we earn we never seem to have enough to buy everything we want.

 

A Simple Formula For Financial Success

 

Why complicate it? Here’s the way you can insure you get ahead. All you need to do is:

 

Spend less than you earn.

 

When we spend less than we earn we have left over money. Put that extra aside, let it accumulate, and we’ll end up with all the money we need for emergencies or otherwise. On the other hand, spend more than we earn and we start burning up our future earnings, which is another way to say we go into debt. A no brainer, right?

 

You’d think a concept so simple would make everyone a saver, but the truth is very few people apply this rule successfully.

 

Six simple tips to spend less than you earn.6 Tips To Spend Less Than You Earn

 

What can you do to insure your success? Embrace the 6 tips we list below.

 

(1) Make savings automatic. Start a savings plan that automatically takes money from your checking account and puts it into a dedicated savings account every time you get paid. If you don’t think of the money in savings as money you have available to spend it’s bound to help.

 

(2) Start hating credit cards. If you hate credit cards you’ll be less likely to use them. Try to remember that every time you use credit you’re spending future income—that’s income you haven’t yet earned and have to pay back. Also, think of the interest you pay as a private tax you pay to banks. Who likes taxes or banks for that matter? If you put credit cards in their proper prospective you’ll be far less likely to use them and spend money you don’t have.

 

Develop a steel will of resistance.

JB hones his incredible will of steel to resist buying more than he can afford.

(3) Develop a will of steel. You’ll need superpowers of resistance to avoid the temptation to overspend. It helps to tune out all advertising in any of its forms. Also, set a rule and make yourself wait 24-72 hours before you buy anything. If you give it enough time you can re-examine your need to buy with a calmer head.

 

(4) Set a budget. It’s easier to resist buying if you have a strong sense of how much money you can spend in the first place. The only sure way to do that is develop a budget that uses real numbers to account for all spending. That includes regular spending, occasional spending, and infrequent or emergency spending. To find a free budget app for your smart phone or smart pad visit your online app store (or i-Tunes for Apple owners) and search on the word budget.

 
 

 

(5) Combine efforts. Combine efforts with someone else and you can end up with far more than you’d ever get all by yourself. How does that look in real life? People who want nicer apartments or homes might do well to join together whenever and wherever it makes sense. For example, a roommate, renter, or significant other can cut the cost of living for the simple reason each party can split common expenses. Less rent or a fraction of the utilities equals more money in your bank account. Carpooling is another great example of people joining together to cut costs. Spend half the money on gas, maintenance and repairs and you’ll have that money to sock away or spend on all the other things you want to buy.

 

Another Great Savings Tip From Javabird.(6) Find cheaper alternatives. We all love going out to a favorite restaurant and blowing a wad of cash on a great meal. We love going out to movies or shows. We love going out for drinks with friends. Before you go, ask if there’s a cheaper option, one that satisfies the urge to socialize without all that added cost. Whenever you cut your costs this way, the point isn’t to live by doing less, but become a smarter, savvier shopper.

 

For more ideas to spend within your means see our posts:

 

Great Savings 22 – Tune Out To Tune In
Great Savings 35 – Wait To Buy
Great Savings 72 – Purge The Urge To Splurge
How Much Should I Save Every Month?

 

Action Item: If you haven’t tried budgeting before it can feel a little daunting. Don’t worry. It’s a process that gets easier over time. A good way to start is with one basic household expense like groceries. Here’s what to do: Go through your checking account for the past three months and add up all the money spent at the grocery store. If you kept them, you can also use receipts—just add them up. Now, divide the total by 13 (there are 13 weeks in a three month period). The number you end up with is the weekly total spent on groceries, and a great starting figure for your weekly food budget. However, we suggest you lower the sum by 10% and set the “extra” money aside so you’ll have enough to cover added expense for holidays, birthdays, or other special occasions.

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