Simple Debt-Free Finance

A Simple Approach to Getting Out of Debt & Into Wealth

Save Money: Spend Less Than You Make!

Posted on | January 3, 2008 |

“He who spends more than he earns is sowing the winds of needless self-indulgence from which he is sure to reap the whirlwinds of trouble and humiliation.”

-Arkad, the Richest Man in Babylon.

Control Thy Expenditures.

Translation: Spend less than you make. This is the 2nd of the 7 cures for a lean purse as detailed in George S. Clason’s The Richest Man in Babylon. This step is an essential part of how to build savings.

“All men are burdened with more desires than they can gratify.”

Separate wants from needs.

“Touch not the one tenth that is fattening thy purse.”

Limit your expenses to 90% or less of your income and budget your desires. Keep saving at least 10%.

“What each of us calls our necessary expenses, will always grow to equal (or surpass) our incomes unless we protest to the contrary.”

This is a simple concept, but often difficult to enact. Many people find it difficult because it means they have to say “no”. It means delaying gratification. It means you have to limit spending. Ours is a culture of instant gratification, and we are pulled from every direction to spend our hard earned savings. We are marketed into debt, and unless you can say no to spending you will quickly find yourself spending tomorrow’s hard earned savings as well as yesterday’s!

At the core of this step to building wealth is budgeting. Many people find budgeting difficult and tedious and often give up hope soon after setting out to use a budget. My personal take on budgeting is that if you craft a budget and try to adhere to it strictly, then you are probably going to fail. It’s like a diet that’s too restrictive. You reach a point where you “fall off the wagon” and go on a binge because it was impractical to begin with.

I’ve had much success with using a budget worksheet to track expenses for about 3 months, just to see where my money goes and then adjust expenses after that. For instance, when I realized just how much I was spending on my cell phone vs. how much I used it, I ditched it in favor of a pay as you go plan.

And I can’t stress enough the concept of paying yourself first. This works so well specifically because it eliminates the need to budget for savings. Most people are used to thinking about saving “what’s left” after all their bills are paid. Make your savings the first bill you pay, and you’re much less likely to touch that money unless you really need it.

Here are some links about budgeting that you may find helpful:

Of course, after you find out just where your money is going, you’ll probably want to go the tried and true route of reducing or eliminating excess spending. This usually takes the form of consolidating phone, Internet and television bills; increasing your insurance deductibles; shopping around for a better insurance rate; canceling the cable; and brewing your own coffee. These decisions depend on how bad your specific situation is. For example, if you’ve got a lot of debt and no savings, then you may consider cutting the cable service. On the other hand, if you don’t have much debt, but would like to beef up your savings then you probably don’t want to live without cable but can probably pass on the $2.50 coffee every day. It’s all a matter of importance and priorities in your life.

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Category: Budgeting, Building Wealth, Saving

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