There’s only one money rule you need to follow:
Spend less than you earn.
It’s such a simple rule, and yet, so difficult to follow. I’ve struggled with this in the past, and I’m struggling with it right now.
It’s easy to get caught up in the wrong attitudes toward money – those attitudes like “I deserve it” and “it’s not that expensive” – that can derail the best laid plans.
I’ve tricked myself into thinking that because I have the money in savings that I can afford things. But without a plan to replenish that savings, I’m breaking the rule and spending more than I make.
Something has to give.
If you’ve read this blog for any length of time, you know that I’ve had a love-hate relationship with tracking spending. I’ve tracked my spending and then I’ve stopped tracking and then I’ve started tracking again. I’ve come to realize that tracking your spending does work…. if you do it!
When I was in college, I tracked my spending by writing the entire month’s expenses on a 3×5 notecard. I’ve used spreadsheets and software. I’ve used budget tracking apps. It doesn’t really matter what method I use – I find that I learn a good deal about myself by going through the simple exercise of paying attention to how much I spend, where I spend it, and how that matches up with my income.
But just because I can track my spending, doesn’t mean it will change my spending habits.
How to spend less than you earn
Commit to change. You’re never going to be able to spend less than you earn if you’re unwilling to accept your own financial situation and make realistic plans to change it. Stop embracing the bad attitudes that keep you broke and unhappy. Stop using the credit cards and relying on them as your emergency fund. Learn to love the things you can do and get for less.
Simplify. It’s all too easy to experience budget creep. When your income goes up, it’s only natural to want to spend more. Keep things simple. Learn to make things from scratch and learn to do projects around the house yourself. The less gadgets, subscriptions, memberships, and commitments you make, the easier it will be to stay on a budget.
Trim the variable expenses in your life. Learn how to use coupons to save money on groceries and household items. Shop thrift stores for clothing and household goods. Reduce the amount you spend on gas. There are a million ways to trim those variable costs. I think I’ve written about a few hundred of them already.
Look for additional income. Ideally you want to find ways to improve your financial picture without investing a ton of time (or money). You may have a hobby that you can turn into extra cash. Perhaps you can negotiate a raise at your current job or pick up a second part-time job. You can make money taking online surveys. You can sell some of your stuff. You still need to pay attention to your spending, but the additional incoming funds make it easier to manage.
Spending less than you earn requires a significant change in attitude. It doesn’t mean that you have to deprive yourself of the the things that make life enjoyable. It just means figuring out how to pay for them and still live within your means.
It’s the only money rule I know of that when followed, it will set you free.