How to Accumulate Wealth Tip #1 – Spend less than you Earn

Wow, I bet you’re thinking you’ve never heard this one before…thought so! Okay, well it may seem pretty obvious but there still are a lot of people that spend more than they earn (yes you read that right). It’s a suicidal habit to get into but sadly it happens more often than not. The average American is said to have more debt than they have savings and that’s a very sad fact.

Know How Much You Actually Earn
When you spend money, you have to know exactly how much you get in after-tax dollars. Knowing you get paid a certain figure before tax is great, but don’t forget that you pay taxes, benefits, and other deductions that make your pay seem a lot smaller than it really is when you get a check or see it in your bank account. When you’re thinking about how much money you have to spend, always consider your after-tax take home pay. This is what you should use to base all decisions on.

Plan Out Your Month
We all have fixed expenses such as mortgages/rent, electric bills, phone bills, grocery, etc. Write down how much you spend on average for everything. You should be keeping all your payment stubs and bills for at least a couple years so that you can keep track of what you’re paying. If you’re throwing everything out, you need to stop because you really aren’t helping your finances unless you have some other magical way of keeping track of your expenses.

Once you’ve finished writing down how much you spend on your fixed expenses, think of the money you spend on non-fixed expenses. This would include things such as dining out, clothing, luxuries, etc. This is exactly where you should be cutting back so that you spend less than you earn.

Make Saving a Fixed Expense
Now, that doesn’t sound right because saving money should not be an expense right? Wrong, if you can’t discipline yourself to save money, then you should make it an expense and a fixed one at that so that you force yourself to save money. Do this after you have planned out and determined how much your other fixed expenses are make it so that you can fit it in so that you won’t be strangling yourself yet enough so that you’ll cut back on unnecessary purchases.

Mo2 Thinks
It’s much too easy to spend nowadays with the credit card and not having to pay for something for 4 weeks. But in order to become financially free, we have to control these impulse purchases and force ourselves to take control of our finances. If you’re buying something you need to think twice if you can really afford it and if you can if you really need it. Whatever you do, spend less than you earn after taxes!