Golden Money Truth #1: “If you spend more than you make you will be poor”Tweet
To live a financially stable life it’s essential to “Cut your coat according to your cloth“, which means do whatever you want to do within your ability/available resources. If you can’t afford something ask yourself, “Do I really, really need it?” And, “Do I have to have it now?” The chances are the answers will be “no”, so wait and save up for the things you want, you will appreciate them more, and there is a good chance once you have worked and saved hard you might change you mind because the thing you think your wanted it not important enough to give up your hard earned money for.
Getting into financial trouble usually happens when people spend more than earn. They take on debt to buy things they think they need but probably dont need. If you want to live happier and savvier, debt is your enemy. Avoid it like the plague.
Three reasons to despise debt:
- Debt allows you to buy stuff you can’t afford
- Because it’s not your money (you havent worked for it, yet), people often buy stuff they don’t need
- You will end up paying 20% to 35% extra for every product you buy with a credit or store card due to the super high interest rate
If you cut up all your credit and store cards, and don’t use loans or HP (hire purchase), it will be tough to spend beyond your means, so avoid them at all costs. Once you start using credit it is usually a downward spiral which is difficult to break free of. Repayment of credit each month reduces your disposable income for years to come. The repayments are like taking a pay cut, you simply won’t have as much money at the end of the month, so you may be tempted to buy things you need with more credit – increasing your debt further still. Then, the following month your disposable income will be reduce again, at which point you might find it tough to pay off the repayments and all the necessities in life such as rent, bills, food, etc.
Therefore, if you’re currently in debt, your primary aim should be to pay off your debt. Once the debt is gone you will have more dispoable income, be able to save for a rainy day, feel less stressed, be financially stable and maybe even buy a few things you really want. There are lots of great resources on how to get out of debt:
- How to get out of debt – JD Roth from Getrichslowly
- Help yourself to sort out your debts (pdf) – Citizens Advice Bureau
- Debt-free wannabe (forum) – Moneysavingexpert
Here are some famous sayings that sum up the need to live within your means (and here are more wise quotes about money):
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” (Basically spend less than you make) Charles Dickens
“The art of living easily as to money is to pitch your scale of living one degree below your means.” Sir Henry Taylor
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” Will Smith
“That man is richest whose pleasures are cheapest.” Henry David Thoreau
Just remember that high interest debt is best avoided at all costs if your goal is to live happier, spend less than you earn, pay off debt, and shiny products won’t make you happy. Then, you should be on the road to financial stability before you know it.