Most money “survival guides” tell you the exact same thing: spend less money than you make. This sounds so obvious that it’s almost ridiculous to say it at all, but think about how many people spend themselves into debt well beyond the income they actually make.
Even people who earn high incomes often carry huge debts to the point that their actual net worth is negative. If you make only minimum monthly payments, the amount you owe will continue to grow and grow over time.
Pay Off Your Debts Quickly
There is nothing inherently wrong with borrowing money. The key is to borrow money toward an investment that will be able to pay back the principal and interest on its own. Keep the amount borrowed manageable so that even if things don’t go as smoothly as you expect you can still easily afford the payments. Try to pay back more than the minimum payment and you’ll pay it back early and save some interest expense.
Maximizing income can be easier said than done for most people on the economic ladder. Therefore, it’s equally important to keep your monthly expenses to a minimum. This is extremely difficult for anyone living beyond their means.
Consumer spending can make life fun, it often seems that our society is caught up in a cult of consumerism. People are driven by advertisers and the Federal Reserve’s monetary policy to spend every last penny they earn. This is especially difficult for those in places where they can easily see neighbors or coworkers with the latest trendy purchase. “Keeping up with the Jones’s” is an all too real phenomenon.
Even after spending money on necessities, we are all enticed to spend even more on discretionary goods and services such as going out to eat instead of cooking, taking vacations, buying or leasing a new car, and being sure to have the latest tech gadget.
Salesmen are trained to not leave money on the table. Marketers compete for every last dollar for fear that if they don’t get the sale, somebody else will beat them to it.
Spending money can add to your quality of life in a lasting way if it is set aside in savings and then invested in things that you understand.
Here are some practical ways to minimize your monthly expenses:
∙ Consider a virtual office for your business. You will save money on triple-net rent, employees, and commuting expenses. With cloud storage services, you probably only need a laptop or tablet to make it work.
∙ Cook more and eat out less, especially for lunch. When you do shop for groceries, look for sale items and use coupons whenever possible.
∙ If you need to finance a necessity, think twice about it. Try to take better care of the things you have now so you don’t need to replace items frequently.
Smart managers of their money take the time to understand their finances by maximizing income, reducing expenses, and saving the balance. It’s also important to be able to communicate to your family members, especially children, about why it’s necessary to cut back. By exercising total control over your money, you will suddenly see extra money in your bank account at the end of every month.