How to spend less than you earn is easier than you think. Our ancestors traded with basic goods and services, not loans and credit cards. Focusing on basic necessities, they didn’t possess all the luxuries and commodities we have today. Incorporate the same concept, and you’ll be one step ahead being debt free and living comfortably. Here’s how to spend less than you earn in 4 steps:
Step 1: Study your income
Interpret your income by understanding where your money is coming from. Being employed by an employer provides tranquility knowing a steady paycheck is on the way. On the other hand, self employment offers all sorts of different streams of income. Recognize when the money is coming in: weekly, bi-weekly, and if you get bonuses during the year. Understand how much income you are making on a monthly and annual basis.
Step 2: Study your expenses
Distinguish between “wants” and basic necessities; air, water, food, shelter, and clothing. Analyze all of your expenses: money spent on rent or mortgage, food, going out, and clothing. Ask yourself if all of these expenditures are really necessary.
Step 3: Have a budget
Some people find themselves living paycheck to paycheck not knowing where all their money went. In this case, it’s best to have a budget. Write down a list of your income and all your expenses for the month. Simply subtract your expenses from your income. Your expenses shouldn’t exceed your income, meaning, if you make $2000 a month you shouldn’t be spending over $2000 a month.
Step 4: If you can’t spend less than you earn
Income from occupying a full-time job hopefully covers your expenses. Furthermore, work more hours, overtime if possible. Get a part-time job if necessary. Find a better paying job: look online or in your local classified ads. Start a small business. Sell stuff you have at a garage sale and online on eBay, Kijiji, or Craigslist. Consequently, if you aren’t able to spend less than you earn, you’ll go into debt.
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