If you read enough personal finance blogs, you’ll see a common theme and the number one answer to your financial dilemma — “Spend Less than You Earn”. Unfortunately, it’s easier said than done, otherwise, we wouldn’t have this rampant debt problem in our society. Fortunately, I went through this myself, and over the years, I’ve learned a few tricks that might help you.
The secret to spending less than you earn
Step #1 You Must Know Your Income
I find it amazing the number of people who call the Dave Ramsey show who cannot immediately say how much they make annually. Actually, I used to find it amazing until I found myself in the same category.
This step is especially hard for people who run a small business, have multiple income streams, or whose pay fluctuates in any way. Nevertheless, you cannot spend less than you earn if you don’t know what you earn.
Step #2: You Must Establish a Spending Plan (also known as a Budget)
Once you know your income you should remember you cannot spend more than this number.
Some people budget and account weekly, others monthly, and some quarterly. The important thing is that you do keep a budget. If you are new to budgeting here is a list of suggested budget categories as well as a guide on how to make a budget.
Step #3 Put a System in Place to Minimize the Accounting Work
The accounting responsibilities will successfully kill any budget. Make it simple. To start with I suggest you start using the cash budget envelope system.
Now the only rule is that you do not spend more money than you have in your envelope. Always be sure your budget is doing it’s job.
Step #4 Review the Budget, Income, and Spending — Fix Any Issues
You might …