Here are some thoughts from the book The Net Worth Workout: A Powerful Program for a Lifetime of Financial Fitness (see my rating for details) on the importance of spending less than you earn:
Too many people believe a better job and a bigger paycheck will solve their financial worries. Naturally, you want to earn as much as possible, and from every part of your compensation package. For the time being, though, your best short-term payoff is to optimize today's paycheck and benefits package.
A few thoughts on this:
1. The reasons I think spending less is more powerful than earning more is because it's something you have more control over and something that can be managed in the short-term. You can cut spending today and see a benefit today, but it takes months and years to grow your income -- and even then, even with your best effort, your income may not increase like you want it to. I realize there is a difference of opinion on the value of spending less versus earning more, but spending less than you earn is still my best piece of financial advice.
2. That said, I'm also a big fan of doing all you can to grow your income -- which (usually) means concentrating on your career. Your career is your most valuable financial asset, offering you many financial benefits. You can make the most of it by getting a college degree and managing your career to its full potential. Doing this well can earn you millions of dollars in extra income throughout your lifetime.
3. In addition to maxing out the potential of your career, you can also earn some extra income in a variety of ways.
4. Many people say the key to their financial problems is making more, but I don't believe this. When they make more, most people simply spend more (at which time they say they need to make even more) and are no better off financially. It doesn't matter if you make $25,000 a year or $1 billion a year, if you spend more than you make, you're going backwards financially. People who internalize and act upon this concept are the ones who do a great job at growing their net worths.
This is the most simplest way to become rich, produce more than you consume. It means that we have to earn more than we spend. It is being frugal, thrifty and a savekaholic (It means developing the habit of always saving some amounts in the bank.) Ask not what money can do for you but rather ask what you can do for the good of money. Treat money with tact and respect and it will return to you a hundredfold. Spending less than you earn will only be possible if we feel and spend only on our needs rather than our wants. Once you have made spending less than you earn it will afford you to have money for possible investment objective. Never trust money but put your money in a trust or trust account like mutual funds, savings and time deposits would enable a person to become rich and financially independent in the future. Spending less than you earn would enable one to make the excess money be its servant by letting it work for you instead of against you. If you spend more than you earn it will lead to insolvency and eventually lead to borrowings which will make money to be your master since you have to pay interest charges to the borrowed money, hence it becomes your master instead of becoming its slaves. Spending less is also congruent to delaying instant gratification. It means that once you lessen your expenditures, halt small pleasures for a greater, nobler and lasting investment objectives you will tend to attract more money and wealth in your life. Money begets money as poverty attracts more poverty. Earn your money first before spending it is one of the wisest money advice we can get. In the end we can sum it up in one phrase: " If your outgo exceeds your income then your upkeep becomes your downfall."
Posted by: Dr. Artfredo C. Abella Ph.D. (Los Angeles, California.) | October 16, 2007 at 05:01 AM
This is the most simplest way to become rich, produce more than you consume. It means that we have to earn more than we spend. It is being frugal, thrifty and a savekaholic (It means developing the habit of always saving some amounts in the bank.) Ask not what money can do for you but rather ask what you can do for the good of money. Treat money with tact and respect and it will return to you a hundredfold. Spending less than you earn will only be possible if we feel and spend only on our needs rather than our wants. Once you have made spending less than you earn it will afford you to have money for possible investment objective. Never trust money but put your money in a trust or trust account like mutual funds, savings and time deposits would enable a person to become rich and financially independent in the future. Spending less than you earn would enable one to make the excess money be its servant by letting it work for you instead of against you. If you spend more than you earn it will lead to insolvency and eventually lead to borrowings which will make money to be your master since you have to pay interest charges to the borrowed money, hence it becomes your master instead of becoming its slaves. Spending less is also congruent to delaying instant gratification. It means that once you lessen your expenditures, halt small pleasures for a greater, nobler and lasting investment objectives you will tend to attract more money and wealth in your life. Money begets money as poverty attracts more poverty. Earn your money first before spending it is one of the wisest money advice we can get. In the end we can sum it up in one phrase: " If your outgo exceeds your income then your upkeep becomes your downfall."
Posted by: Dr. Artfredo C. Abella Ph.D. (Los Angeles, California.) | October 16, 2007 at 05:07 AM