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This is such a simple concept and yet… it escaped me for years.
For most of my 20’s I spent what I wanted to spend and it had little to do with what I earned. The gap between my earnings and spending was never huge but it was enough to have credit card debt and stay on the minimum payment plan for my student loans. It also kept me in a perpetual state of consumer guilt. The short high I got from buying myself something nice was immediately followed by dread that I couldn’t afford it.
Spending less than you make simplifies family life by:
- Reducing tension or arguments around spending.
- Answers the question, can we afford it?
- Creates a cushion for the inevitable but unexpected bill.
For my family, spending less than we make means my husband and I no longer have arguments about purchases. It’s easier to have a non-judgmental conversation about our ‘wants’ and ‘nice to-haves’ and leave emotions out of it.
This strategy also helps when you have unexpected bills.
The best laid budget can be shredded by car repair bills or a cracked tooth. It’s not a matter of if you’ll have a large unexpected bill but a matter of when.
If you’re living below your means those out of the blue bills sting but you pay them and move on. If you’re living pay cheque to pay cheque those unexpected bills just push you further into debt and make it harder to see a way out.
If you’re in debt or struggling to pay your bills spending less than you earn will be challenging to implement. Start with small changes like cutting a few nice to have bills like cell phones with data plans, premium cable television and curb your eating out. Then look for ways to increase your income to pay off debt (check out this post and the comments section for ideas on creating side income).
It took us a few months to cut our bills and spending and then almost two years to pay off all of our consumer debt. In September of 2011 we were finally able to start spending less than we made and start saving.
Now when we have an unexpected bill we pay it with cash, dipping into our savings if need be, and then get back to our regular savings the next month. The peace we feel now was worth all the hard work of getting out of debt.
Has anyone else had a shift in their financial life from spending more than they made to spending less?