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Budgeting 101: Living On Less Than You Make
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Tags: spend less bills spend less begin to save Less stress track spending

A person once asked me if I had to break down my ideas for managing money wisely into a single principle, what would it be? First of all, that is crazy! Managing your money wisely isn't just one thing, it's a way of life.? After some careful thought, I think I might have come up with my one principle that summarizes my money and life philosophy. If there is a single rule that underlies everything I talk about and teach, it's this simple sentence:

Spend less than you make.

It sounds so simple, doesn't it? Yet there are many people burying themselves in debt (spending more than they earn) or living paycheck to paycheck (spending exactly what they earn).  Simply spending less than you make has a cascade of positive effects.  First, you begin eliminating your debts.  Spending less than you make frees up the money you need to make larger payments on your debts.  Over time, they begin to disappear, reducing your monthly bills and giving you even more breathing room. Second, you begin to save.  First, you build up some cash savings in your account, enabling you to roll through emergencies (like a car or home repair).  You'll also have the breathing room to start saving for your future (adding to your retirement).  Third, your stress level falls. Knowing that you have fewer debts, your emergencies are covered, and your retirement is being funded reduces your stress level.? You sleep better, your overall health improves, and you feel happier about life. Finally, you are now able to explore possibilities closed to you before.  Most people don't realize that when your debts are gone and you are spending far less than you're bringing in, you suddenly might have many more career possibilities.  You don't have to stick with a high-stress job - you have financial freedom to move on to something else, chase your dreams.  You can even relocate enabling you to live where and how you want to live!  All of this comes from one basic principle - spending less than you make.  That statement actually has two parts.  Spend less refers to the fact you do need to cut your spending.  The first step doesn't need to be anything drastic.  Many of the more extreme money saving tips come from people who have already tried out the basic tips and love them, so they seek out more intense strategies to further cut their spending.  I do this myself, I'm always trying to find a new money saving strategy, disregarding the ones that didn't work for me and keeping the ones that do.  Here are some ways to get started.

Go through every monthly required bill.  Ask yourself if you really need that service at all.  Do you really need pay movie channels or could you just use Netflix or rent a movie once in a while from Redbox?  Do you really need access to Facebook and Twitter on your cell phone or could you just replace it with texting only.  Go through each bill and see if there are any optional services you can eliminate.  Do you really need cable?  (a cancellation we made recently).

Keep diligent track of your spending.  Keep a notebook (at the very least) and write down every expense you have.  This simple process of doing this will make you think twice about unnecessary expenses.  When you do have a month's worth of expenses written down, take a careful look at them.  Ask yourself whether or not each of these expenses actually contribute to the value and joy of your life.  That process will offer a lot of insight for you as to where your spending is going to waste.

Look carefully at your routines.  Watch what you do every day.  Are there things you do each day (or most days) that cost money?  Those things are the most powerful ones to adjust, as trimming just $4 from your daily spending can save you $20 a week (for a routine that is only Monday - Friday).  Do you stop for coffee each day?  Why not try making your coffee at home (at least most days).  Perhaps you could take your lunch to work a few days a week.? Look at every regular expense you have.

Get a better bank.  The vast majority of people are with banks that don't treat them very well.  No interest at all on their checking accounts.  Tons of fees for ATM use.  Ridiculous overdraft policies.? A VERY tiny interest rate on savings accounts.  Monthly usage fees of all kinds.? All of these things are a waste of money.  Switch your accounts to a bank that respects you.  From my own personal experience, we left one of the GIANT "too big to fail" banks.  We moved those accounts to a smaller bank that would be considered local for our area.  We get great customer service, solid interest rates, and I've never had a fee of any sort.

Do some one-time energy improvements around the home. Replace some of your light bulbs with energy saving bulbs.  Install a programmable thermostat.  Keep the thermostat lower than you normally would in the winter.  Wash clothes in cold water only.  Install some SmartStrips to cut down on electricity use.  These tactics will cut down your energy usage annually, directly reducing your energy bill.

The rest of the phrase, than you make, though, points to the other part of the equation:  increasing your income.  Increasing your income gives you more money with which to get rid of debts, save for your dreams, and build a foundation for whatever future moves you may want to make. There are countless ways to earn more money, but there are several tactics almost anyone can apply in their life.  Here are five ways to get started increasing your income:

Be productive at work.  The time you spend sitting idle, browsing the web, talking with your co-workers, is time you've lost.  Devote as much of that time as you can to your career, even if it's not directly on a work project.  After all, this is the time to work and it needs to be balanced with the things not are not devoted to your career.

Work on your transferrable skills.  These are the skills that one can utilize in almost any career path.  Work on mastering such skills.  Put together an effective time management scheme for you.  Get into a routine of organizing and filing your paperwork.  Brainstorm ideas for things going on in your office.  Write clear documentation for the standard procedures of your work.  Step up to the plate, take charge of a work project, and get the ball moving forward.  All of these things push you towards developing skills that are genuinely useful no matter where you're heading in life.

Build strong relationships with as many people as you can in your field.  Join services such as Twitter or LinkedIn and start conversations with people in your career.  Send emails to people you've interacted with a lot in your career and keep up with what they're doing.  If you have an opportunity to connect people that can help each other, do it immediately, without hesitation.  Share what you know and be valuable to others.

Start a side business.  I don't mean filling our surveys or other things you can use to burn a few minutes a day and earn a few pennies.  I mean actually devote serious time and effort to turning your passion you have into a money-making enterprise.

Step up to the plate at work in little ways.  There are lots of simple ways to stand out.  Speak up at meetings.  Show empathy for the problems that others have.  Take on only projects you can handle, but do them well. Get to know the support staff - and treat them well.  Don't burn bridges when you move on - make an extra effort to maintain good relationships when you leave.  These little things add up to a huge difference.

Keep that rule in mind:  spend less than you make.  Each move you make to maximize the gap between what you earn and what you spend will put you in a better place in your life.

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