The easiest way to build wealth and reach financial independence is simply to spend less than you earn. It’s not a complicated formula developed at the Harvard Business School or known only to the barons of Wall Street.
It is an easy concept to understand, but there are some facts that can complicate the process and truthfully, most of them, involved you, the consumer (by the word, I don’t like that word.)
If you spend more than you earn…and tragically last year, for the first time in our nation’s history, a majority of our citizens spend more than they earned. The numbers I saw a few days ago, said that the average American spent $1.22 for every dollar they earned.
If you’re plagued by overspending then you need to STOP IT NOW but you need to also understand why you’re doing it. Knowing what drives your spending, helps you fight the feeling and save money so that you can spend less than you earn.
It’s Too Easy To Access More Credit
Every day people are overwhelmed with letters telling them just how special they are. You’re special to credit predators as long as you sign on the doted line. I’m sure you mailbox is filled with these “special,” “limited time only” offers just for you.
For most people, this is the biggest reason for overspending. It’s quick and easy to obtain new lines of credit, which means new lines of spending.
It’s exhilarating to think you have extra cash at your fingertips. It can almost feel like free money. The predators send you a card with a $2,000 limit, so it is easy to think that you now have access to more money. Truthfully, you do have the access but there is a big hook hidden beneath the “easy” offer. The real problem starts for you when you begin charging things for which you don’t have the cash to pay for. It is all too easy to think about the small monthly payments instead of the total purchase price.
It’s Too Easy To Access Your Cash
Remember the days when you given a paper payroll check from your employer which you had to cash and/or deposit at your local bank? In paying your bills, you either had to write checks and mail them to your creditors. Sometimes you even kept cash for other purchases. You had to carefully balance your checkbook to make sure you weren’t bouncing checks. The act of spending money meant you had to do a little planning and perish the thought, some simple math.
Those days are long gone, and most people have access to their bank account 24 hours a day and truthfully, without personal discipline, that can be very dangerous.
In fact, a popular television commercial by VISA pokes fun at people who don’t use their debit and/or credit cards to pay for their purchases electronically.
Here’s the bottom line, when you aren’t physically handing someone money or a check for a purchase, it can almost feel as if you aren’t spending money at all. Using cash gets your mindset back to start point and helps you plan and spend more wisely.
It’s Easy To Misuse Credit Cards
Credit cards in their beginning were much different than today. You were required to pay the balance in full each month. This came in handy as you could make purchases without using your own cash and then repay it all at the end of the month. Travelers and business people found this a tremendous tool. When used properly, credit can be a powerful financial tool.
The credit predators got wise to their opportunity to make more money so they decided to bless us with minimum payments options and it became easier to pay only a portion of the bill. Here you begin the decent downhill toward debt. All the good intentions you promise yourself to pay it off next month simply put off the fact interest is adding up.
The card company makes the minimum payment due a very small amount, which means that you can afford to make the payment, but in doing so you are simply adding on the time and money it will take you to pay the debt. You end up paying a lot more for your items that you considered.
It’s Easy To Give Into Temptation
Your friend calls and wants to go out to dinner. Your co-workers are all going to the movies after work? You’re tired of wearing the same outfits over and over even though your co-workers are walking in with next clothes on a regular basis.
Make no mistake, temptation is all around you. But it’s your best interest to learn an amazing two-letter word which will ultimately save you a boat load of financial misery. The word is “NO.” Knowing when to give in and when not to be is crucial to being financially successful. If you pay off your balance in full each month it may be OK but even then is your money being well spent?
Your financial future depends on what you do today. Come up with some alternatives and stick to that important budget. Giving in brings guilt, fear and uncertainty – is that item worth it to you or your family?
Spending feels good at least for the moment. There is a rush in getting the new item but it can be short lived. The idea is to feel good about spending wisely. People can be addicted to spending. Some folks spend big while others dollar their way through the month. Either way spending needs to be kept in check.
Nothing feels better than balancing your checkbook at the end of the month knowing you have been financially wise. Even better is the feeling you have saved for the future or for that unexpected situation everyone faces.BLOG COMMENTS POWERED BY DISQUS