Do you spend more than you earn?

The sudden loss of a job, as has been experienced by so many during this financial crisis, has revealed to them just how far over their heads they really are. Don’t wait for an emergency like a job loss or a sudden illness to take control of your spending.

If you live below your means (regularly keeping your expenses below your monthly income) you will be able to put that extra money into savings now – before that “rainy day” comes. Your household is like a business – if you spend more than you take in you create debt. A business that continually takes on debt will fail – it’s the same at home. Eventually the debt will take over!

Knowing where your money goes is the first step. Try keeping track of all the money that goes out of the household for 30 days. Save all receipts and then categorize where the money went. After the 30 days, review your report and then decide if your money is really going where you WANT it to go? You may discover money is being spent on extras that you didn’t plan for. Once you see where your money is going you can then make educated decisions about spending that can be eliminated or redirected to a more acceptable place.

Whenever you are faced with a desire to spend, ask yourself if you really need that item? Separate wants from needs. Needs must be met but wants can be postponed or denied. Many times if we postpone spending, we find that we were just impulse spending and going without the item did us no harm.

Ultimately, you must make a choice. You can immediately spend every dollar that comes in or, you can choose to live financially below your means. If you want to build up your savings, you have to live on less money than you earn. This is a good habit that can become a lifestyle. Did I forget to mention the extra benefit of stress relief that comes with knowing you have a financial reserve to work form?

Let’s not follow the path of our nation, instead let’s choose to be a living example. It IS possible to spend less than we earn, pay off our debt and save for the unexpected. If we can do it, maybe we can convince our government to do the same.

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