#66. Adulting Is Hard: Tips To Help You Spend Less Than You Make
As I've written about before, the concept of building wealth is simple, but putting it into practice is quite difficult.
From paying bills to managing your finances, adult life can feel overwhelming at times. But perhaps the most challenging part of adulting is living within your means.
In a world where consumerism is king, it can be difficult to resist the urge to spend more than you earn. However, living beyond your means can have disastrous consequences, leaving you drowning in debt and financial stress.
According to a survey by the Federal Reserve, nearly 40% of Americans would struggle to cover an unexpected expense of $400. Don't let this be you.
Fortunately, there are practical steps you can take to help you spend less than you make and achieve financial stability. Here are some actionable tips to help everyone take control of their spending and build a solid financial foundation.
One. Track Your Expenses And Set A Budget
Okay, okay, okay. Before you yell at me saying, "We know you like budgeting!", listen up.
The National Foundation for Credit Counseling found that only 39% of Americans have a budget in place to track their spending.
If you only take one thing out of this entire article and you just do a one-time budget that only lasts one month, I promise you that you will be better off. And here is why.
A budget does one major thing for you internally - it changes subconscious spending to conscious spending. This simple change of making all spending decisions conscious ones will force you to look at things differently.
Also, believe it or not, it will give you more enjoyment in the long run. Budgeting gives you power over your finances. That $5 daily coffee drink will taste so much better if you have already planned for it financially.
Two. Cut Back On Expenses
I know. This is another icky-sounding tip. But, looking for ways to cut back on your expenses will help you free up more money to put towards your savings goals.
One way to cut back on expenses is to reduce your discretionary spending. A big spending category that people do not put enough thought into is their food spending.
Another way to cut back on expenses is to actually negotiate your bills. You may be able to negotiate lower rates on your cable, internet, or phone bills. You'd be surprised what you could save with a simple phone call!
Three. Find Ways To Increase Your Income
Now comes the more fun topic of increasing your income. There are two tried and true methods for increasing wealth: 1) Spending less or 2) Earning more. And if you combine both, you will be a wealth-building machine.
There are many ways to increase your income depending on your skills and interests. You could try picking up a side hustle, like driving for a ride-sharing service or selling items on eBay (if you do not think people can make a lot of money from this, Google "reselling tips" and do some light reading).
You could also ask for a raise at work or look for a higher-paying job. No matter what you choose, just remember to avoid lifestyle creep. As your income increase, you want to avoid having your expenses increase as well.
Four. Automate Your Savings/Investing
One of the best and easiest ways to save money is to make it automatic. If money is being taken out of your bank account each time you get paid, you will not have time to miss it.
Set up automatic transfers from your checking account to your savings accounts each month. This will ensure that you're putting money away without even thinking about it.
You can also automate your retirement savings by contributing to a 401(k), IRA, or a plain ole' taxable brokerage account. After you fund your emergency account, investing for your future is a necessary next step.
Five. Get Accountability
Finally, it's important to have accountability when you're trying to spend less than you make.
Find a friend or family member who can support you in your financial goals. You can also join a financial support group or hire a financial planner to help you stay on track.
I am also considering creating an accountability program in the future. If you would like me to be your accountability partner, let me know in the comments. If enough people are interested, I will pursue this.
To Sum Things Up
Spending less than you make is one of the key components of financial success. Making this a habit will put you ahead of the vast majority of people.
Be aware though, if a person is able to increase their income but increase their discretionary expenses at the same rate, they will be no better off.
Picture this simple scenario. Joe receives a $10,000 raise at work. He then leases a brand new luxury truck that will cost him $1,000 a month.
Although Joe received a raise at work, he is actually poorer. Don't be like Joe.
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