- People who spend more than they earn (accumulating debt)
- People who spend all that they earn (saving nothing—breaking even)
- People who save 2%, 5%, 10% or even 20% or more (growing savings)
We’ve seen $50,000 earners who save 20% of their income ($10,000), $100,000 earners who save just 5% ($5,000), and people earning well into six figures annually who save nothing or are adding debt.
Suppose that you currently earn $50,000 per year and spend all of it. You may wonder, “How can I save money?” Good question! Rather than knock yourself out at a second job, you may want to try living below your income—in other words, spending less than you earn. Consider that for every discontented person earning and spending $50,000 per year, someone else is out there making do on $45,000.
A great many people live on less than you make. If you spend as they do, you can save and invest the difference. In this chapter, we examine why people overspend and help you look at your own spending habits. When you know where your money goes, you can find ways to spend less and save more so that someday, you, too, can live richly and achieve your goals.
Now, it’s entirely possible that in part because of the relatively high cost of living where you currently live, you may feel that you don’t have much, if any, ability to really lower your expenses. That may be true, but this may get you thinking about moving or taking a job in a location with more reasonable costs. In a strong economy or if you work in (or can switch to) an in-demand occupation, you may have more options than you realize.
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Examining overspending
If you’re like most people, you must live within your means to accomplish your financial goals. Doing so requires consistently spending less than you earn and then investing your savings intelligently (unless you plan on winning the lottery or receiving a large inheritance). To put yourself in a position that allows you to start saving, take a close look at your spending habits.
Many folks earn just enough to make ends meet. And some can’t even do that; they simply spend more than they make. The result of such spending habits is, of course, an accumulation of debt.
Most of the influences in society encourage you to spend. Think about it: More often than not, you’re referred to as a consumer in the media and in the hallowed halls of government. You’re not referred to as a person, a citizen, or a human being. This section looks at some of the adversaries you’re up against as you attempt to control your spending.
Having access to credit
As you probably already know, spending money is easy. Thanks to ATMs, credit cards, myriad smartphone apps, PayPal, Venmo and so on, your money is always available for you to spend, 24/7.