It’s not really a secret, but it all comes down to the following: spend less than you earn. Big surprise, no? It does seem quite simple, but with the U.S. being a culture of consumerism and spending beyond your means, I wonder how many people actually know that simple part of the equation. It’s a lesson I’m learning as well, and I honestly don’t see that key point spelled out very often. Perhaps it’s because it seems like it should be obvious, although too many of us didn’t get the memo.
Breaking it down ever so slightly, in order to spend less than I earn, I have two options:
1) Decrease my expenses or
2) Increase my income
Decrease my expenses. Budgeting and frugality is what I would mostly tie into this part of the equation, but I can brainstorm some other factors that could play into this as well. For example, if you take a greater interest in your health by eating right and exercising, you may reduce future medical expenses and perhaps increase your earning power by reducing sick days, for example. If you’re just getting started on this road, find out what you’re spending and cut out some of the fat in your budget from there.
Increase my income. This will include ways to increase passive income (stock investing, interest, etc.) but investment in myself applies as well. Education and self-development are especially relevant here, as investing in yourself will usually pay off with increased earning power. Finishing your degree, developing job skills, or even *ahem* developing a blog as a source of passive income are some examples of ways that you can increase your earning power.
Most of the things I discuss on this site will relate to the these two options, but with an additional emphasis on the self-development that I believe pays off in the long run in the financial game and life in general.
I’ve run a little longer than I intended to, but if you take nothing else from this post, just remember:
Spend less than you earn.
Tags: financial independence
[...] YourFunds.org wrote an interesting post today onHere’s a quick excerpt It’s not really a secret, but it all comes down to the following: spend less than you earn. Big surprise, no? It does seem quite simple, but with the U.S. being a culture of consumerism and spending beyond your means, I wonder how many people actually know that simple part of the equation. It’s a lesson I’m learning as well, and I honestly don’t see that key point spelled out very often. Perhaps it’s because it seems like it should be obvious, although too many of us didn’t get the memo. Break [...]