Plug the holes
If you were in a boat in the middle of the ocean and you noticed that water was coming in through a hole, would you spend your time scooping the water out over the side of the boat, or would you plug the hole?
Getting out of debt works with the same principle. Our spending is like the water coming into the boat, and the way to fix it is to QUIT SPENDING!
Yes, it is obvious, but it needs to be repeated because for some reason our brains can realize that it is true, but not do anything about it. So our goal in this lesson is to plug the hole, stop the bleeding, whatever you want to call it: quit spending.
Spend less money than you make
Getting out of debt, creating wealth, living financially free, retiring with cash in hand can all be achieved by following one simple rule:
Spend less than you earn.
If you do everything else wrong, but get this correct you will still be okay. But, the scary truth is that if you do everything else right, but get this wrong you will be in bad shape.
It is very simple, but it is not easy. But it is the only way to stay debt free. It is the only way to have any lasting wealth. It doesn’t matter if get $10 million from lottery winnings, if you can’t follow this simple rule you will be back to where you started in no time (and often even worse.)
It doesn’t matter how much you make. Everyone (I used to do this too) thinks that when they make more money they will be able to spend less than they earn. This just is very rarely true.
We all know someone who no matter what time something starts you can count on them being 15 minutes late. It doesn’t matter if they have the entire day free, they will still be late. It isn’t a matter of the time available as much as it is a matter of discipline. So it is with our spending.
If you can’t spend less than you earn with what you have now, you will not be able to when you get more. Parkinson’s law states that “expenses rise to meet income.” So without a deliberate and intentional effort each increase in income that you get will quickly be used up by new expenses.
This is frustrating part about getting a raise. As much as I loved getting them, they never seemed to make bill paying any easier. Have you ever felt this way?
So I know I need to spend less than I earn, but how?
Make a budget
A budget is absolutely one of the best tools that you will find to help you spend less than you make. I have written extensively about how to budget, but I suggest you start with this post – how to make a budget. It will walk you through all the steps you need to get started on an effective budget. If you are really serious about getting out of debt, don’t skip this step.
Everyone who does not budget spends more money than those who do. It is as simple as that. It doesn’t have to be painful and can even be fun.
Eliminate the temptation to spend.
It is not a bad idea at all to cut up the credit cards. Romans 13:14 says to,”make no provision for the flesh in regard to its lusts.” I did this by not going to the mall and not going out to eat. These were my two problem areas where I spent way too much money. Find out what your temptations are and run from them and set yourself up to succeed. Alcoholics shouldn’t hang out in bars and over-spenders shouldn’t go to the mall!
<< Creating a balance sheet (Part 3) | 15 Ways to cut expenses (Part 5) >>
{ 7 comments… read them below or add one }
I recommend similiar steps. In addition, track your expenses for a few months to help with creating a budget. Good information on your site. I also blog on finances http://www.practicalfinances.com from a biblical perspective.
@Dana
Good to meet you!! Thanks for stopping by!!
I agree that a budget is a very important part of getting out of debt… I mention it in one of the articles in the series, but I don’t remember which one…
If I stopped spending, my landlord would kick me out and I would be homeless. That can’t be a good solution.
@broke
I hope you realize that I am not talking about not paying rent or bills for that matter – I am talking about all the wants and other unnecessary things that push most people over the limit
I agree with you. Thanks a lot
Actually my problem now is how to get out of debt.Do you have a website wherein I can ask help and advise for that matter? I really am.
Hey there,
Helpful info. One of the biggest challenges to budgeting for me is setting a monthly grocery budget — and figuring out the ratio of buying groceries to buying relatively cheap “restaurant” food like a $5 Subway sandwich. Sometimes a $5 sandwich seems like a good deal compared to spending more making a healthy dinner at home. Do you have any advice for how much a monthly grocery budget should be? Or what percentage of your income it should comprise? Or how much you should be spending per meal (groceries and eating out combined)? All of these would be great topics for a blog post. If you have a post about this already, I’d love to see it.
Thanks