This is article 2 of 7 in the
Common-Sense Financial Principles series.
“If I just earned more money, then things would be awesome.”
Ever thought something along these lines. I know that I have, but in time I found out how wrong I was.
Earning more money would make life easier. But it ignores some truths and opportunities.
If you’re feeling stretched the easiest solution our mind produces is to add more income. This is why an $80m Powerball jackpot is so alluring – our brain loves an easy fix to our problems.
But the truth is that as our income has grown over the years, we have added to our lifestyle and debt commitments. Take a quick trip down memory lane and you’ll look back on a time when your payments and financial responsibilities were a fraction of what they are today.
This helps us to arrive at an opportunity. Whilst we undoubtedly have some degree of control over our annual income. We have so much more control over what we spend.
Once we’re in debt, the borrower is slave to the lender, and we cannot simply stop paying up. Have your spending habits ever stopped you from achieving your most important financial goals? Now is a great time to examine your spending habits and make some changes.
When challenging our spending habits, it’s a common reaction that we don’t want to feel restricted. Fair enough. Although in many cases we’re already so tightly bound that a lot of our income is flowing to someone else each month anyway. Isn’t it time to take some of it back?
After three decades in financial services, I’ve seen it time and again. An individual or couple with a modest income but spending less than they earn, will build more wealth over time than a household with a high income where every dollar (and more) flows back out the door. A large income can cover up a lot of financial stupid, but you cannot out-earn bad financial behaviours in the long run.
Spending less than you earn is a time-honoured formula that most of us know, though we don’t always put it into practice. Fortunately, it doesn’t have to be this way and each new pay cycle is your opportunity to get started with spending less.
If there isn’t much room in the budget, a focused effort on debt elimination may be required. Or perhaps it is a matter of being more intentional with your money.
I’ve learned that money is great at following orders. You must be clear with your instructions and firm with your expectations (i.e., set and follow your own budget). You’ll soon see the difference and take control of ever larger chunks of your income.
Have you taken control of your finances to spend less than you earn?
