Money for Life Applied Principle #7 – Spend less than you make
The key to building wealth is spending less than you make on a consistent basis. “A person will be much more successful in achieving true, long-term financial fitness if they focus first on living within their means. The true secret lies in the way we choose to spend our money rather than in the way we choose to earn our money. While there are many ways to earn money, there really is only one way to accumulate wealth-spend less than you make!”
People will sometimes think, “If only I made more money, I wouldn’t need to go into debt.” However, their income level isn’t usually the issue. The issue is how they are spending their money. In order to accumulate wealth and stop accumulating debt, they need to live within their current income level and spend less than they are bringing in.
It’s not always easy to do this, but the long-term benefits are definitely worth it. Think of it in terms of operating a business. “Each of us has a personal company to manage. We have sales in the form of salary or income. And we have costs in the form of house payments, transportation costs, and general living expenses. If we want to create a financially healthy enterprise, we must make choices to spend less than we make. The flip side to this approach leads to an increasing debt load and a complete lack of resources to meet the needs of future spending requirements.”
Get started by creating a spending plan that will allow you to live within your means and set money aside for future expenses, including savings. Once you have created your plan, focus on living within that plan and within your spending envelopes.
Contains excerpts from Applied Principle 7, Money for Life, by Steven B Smith