Fool’s Wealth

Day #4 – Spend Less Than You Earn

In order to truly master your debt you need to begin to minimise the debt that you owe. This way the less debt you have the less interest you will have to pay and the more manageable your debt will become.
In order to have enough money to begin to pay off your debt using money you don’t spend on other things, and in order to do this you have to start spending less that you earn.
If you spend more than you earn then your debt will increase and become more expensive and eventually will get out of control. But if you spend less than you earn then your debt will decrease until ultimately you have no debt and instead have an excess which will earn you money and lead you to becoming extremely wealthy in the long run.

Here are some tips on how to spend less than you earn
1. Budget – Creating a budget is one of the most helpful tools you will need in order to be able to spend less that you have earned. It will train you to control what areas you spend your money in so what you can spend it wisely and effectively and save up enough to reduce your debt. For a more detailed post on budgeting CLICK HERE
2. Cut Your Costs – There are many simple ways you can cut the cost of your spending in order to save some excess. Things such as buying cheaper brands, avoiding expensive brand names, buying clothes when they are on sale, buying food one bulk when they are on sale. You can cut you cost without sacrificing a lot just by buying things at the best time.
3. Don’t spend what you save – Often when we save $5 on food we will go and spend that $5 on something else such as a coffee or some lunch. But it is important that instead of spending the money that you save you either invest it (to make you money) or you use that savings to pay of your debt (and reduce your repayment costs)
4. Cook Your Own Meals – Eating out can be extremely expensive. Cooking your own meals is a great way to save money as it is much much cheaper.
5. Avoid Impulse Buying – Impulse buying is where you buy something you didn’t plan on just because you felt like it in the spur of the moment. You can avoid this by not taking your credit card with you, sticking to what your budget says or even freezing your credit card so you need to thaw it before you can use it. Impulse buying often costs more that you would usually be willing to pay for an item and more than likely you will regret it later on.
6. Put savings aside first – As soon as you get paid (whether it be weekly, bi-weekly or monthly) put a set amount of money aside to pay off your debt. Put it on your credit card or on your loan and decide that you no longer have that money. Then live off the rest and continue to try and cut back and save more.
7. Save your coins – Coins are heavy and they make annoying noises in your pocket. Instead of spending your coins on coffee or chocolate invest in a money tin and whenever you come home put all the coins in your pocket in this tin. When the tin is full take the money straight to the bank and put it on your loan.
8. Use all excess money to pay off your debt – If you ever get bonuses, or money gifts, or even a your tax-refund at the end of the financial year, put the lump sum on your loan. You may think it would be great to buy you clothes, but these lump sums can really help you smash your loan to bits and decrease your repayments immensely.

So I hope now that you are beginning to understand that in order to master your debt you need to spend less that you have earned. So follow these tips and watch your debt begin to decrease as you become the master of your money and your life.