Ok, here it is – the number one most guaranteed way to generate wealth. Guaranteed! Ready for it? People pay big bucks to learn this. There are probably more books and courses on this very point than anything else. All the experts will dress it up to make it seem like some magical, never revealed before secret that is practically unobtainable without their help.
Are you sitting down? OK here goes…….
….. Spend less than you earn – BOOM!!!
Easy? Well I didn’t say it is easy. For so many the seemingly easy access to credit allows them to buy and or maintain a lifestyle that simply isn’t sustainable. At some point that reckless spending catches up and when it does it can bring with it a whole world of hurt.
In order to “spend less than you earn” or “control your spending” or “live within your means” you need to know what is coming in the door and what is going out. Make a list of all income you receive from your job and anywhere else. Now make a list of every bill you have, perhaps rent; insurances; utilities and car payments – don’t forget to list your savings at the top of this list (see part 1 in this series)
These are your fixed expenses – you have little or limited control over these.
When we take these fixed expenses away from your income the balance left is what’s available for your discretionary expenses – the things you can control.
Most of us have sufficient income to cover our fixed expenses but it’s the discretionary expenses that usually get us into trouble.
By tracking your expenses (I’m trying not to use the word ‘budget’) you can begin to find the areas of spending that require attention. Once you’ve identified areas requiring attention, you can begin to consider options to remedy each area.
If building wealth truly is your goal it is vital you track where your money is going.