HOW TO SPEND LESS THAN YOU EARN[WEALTH] = [WHAT YOU EARN] [WHAT YOU SPEND]

Step One: Figure Out How Much You EarnThe first step of the spend less than you earn rule is easy to figure out.Simply pull together all of your bank statements for the last few months and add up all of the deposits each month. This is your monthly income.Youll want to adjust out any unusual income, such as bonuses or gifts, to make sure youre not including them in your budget. You cant rely on these unusual income sources in most cases, so dont set yourself up for failure.If you dont have a stable paycheck, take the last few months income amounts and figure out an average income that you can depend on.Eliminate the amazing months and dont count the awful months either if theyre outliers.This will help you estimate the income you can realistically expect in a typical month.Step Two: Come Up With A Spending PlanYou dont have to have a hard-line budget to make this rule part of your financial plan. Instead, simply make a basic outline on how much money youll spend each month.The key is making sure that your monthly spending is less than the amount of monthly income youve identified in step one.Spend lessThis simple formula has a couple of implications. The first is that frugality can have a very real impact on your financial situation.Frugality is an important part of personal finance.When you decrease your expenses, yourcash flowincreases. If youre living paycheck-to-paycheck on $3000 a month, reducing your monthly expenses by $300 can give you substantial breathing room. (See the Charles Dickens quote at the start of this article.)The big advantage of thrift is that you can implement it immediately. Intheory if there were nopsychological factors you could cut your expenses in half today and yoursavingswould sky-rocket. Thrift pays immediate dividends.Thedisadvantageof frugality is that theres a limit to what you can do. You can only trim so much from your budget before you become miserable. Or until you dont have enough for food and shelter. If you earn $3000 a month, you only have $3000 total you can cut. At $3000 monthly income, your maximum positive cash flow is $3000.Earn moreThrift has limits. You cannot spend less than zero. On the other hand, there is theoretically no limit to how much money you canearn.Frugality is important, but if you want to make real progress, increase your income.In the 3-1/2 years Ive been running this site, I feel like Ive never been able to make this point emphatically enough. The people I know who have met with wild financial success have all done so by increasing their income in some way. Theyve all had to make sacrifices to do this, but once theyve met their goals, theyre able to scale back to a normal way of life. If you want to destroy your debt not just defeat it, butdestroyit do something to boost your income. How do you earn more money? Work longer hours. Get a second job. Start a small business. Sell the stuff you have.All of these work, but they all require sacrifices especially the sacrifice of time. Most people feel that these options arent right for them. If thats the case if youve already cut your spending to the bone and youre unable to earn more then theres really no answer other than extreme frugality and patience.