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The #1 Rule for Financial Success

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Financial Success

There’s no shortage of books, articles, and blog posts in the world about how to spend, save, and invest your money.

And of course everyone has different views and advice.

But there is one piece of advice that I consider to be the #1 rule of financial success that I think every expert would agree on.

The #1 Rule Of Financial Success: Spend Less Than You Earn

If I am spending more than I earn every month, how am I ever going to:

  • Pay all of my bills every month?
  • Save money in an emergency fund?
  • Have money to invest for retirement?
  • Go on vacation without going into debt?

You get the picture. Unless we spend less than we earn, we will gradually end up with more and more debt. Simple.

So how do we make sure that we are spending less than we earn?

#1 Know How Much You Earn

Do you know your monthly income?Live On Less Than $1500 A Month

At my job, we offer financing for people and I am amazed at how many people truly have no clue how much money they earn in a month, or even a general estimate of how much their paycheck is every week.

This is a little tricky if you have an irregular income, but you should still be able to work out what your average income is each month or quarter.

There’s no way to know if you’re spending more or less than what you earn if you don’t know what you earn.

If you don’t know what your monthly income is, make it your goal this week to figure it out. You should be able to look at your bank account history or paycheck stubs and figure it out pretty easily. You will be one huge step closer to succeeding financially once you know your income. You can do it!

 

#2 Know How Much You Spend

track our spending on a tight budgetNow comes the fun part: tracking how much you spend.

I already wrote about the simple way we track our spending.

You can go with a simple method like my spreadsheet or with one of the many apps out there that helps automate things for you. The important part is that you know where your money is going every month.

Have you ever gotten to the end of the month and have no idea where all of your money went? Not great, right? When you track your spending, you will know where your money is going and then can make a plan for how you want to spend it (check out our $1500/month budget).

Make a plan for how you will track your spending over the next month if you don’t already have one. You can simply collect receipts, write everything down in a notebook or spreadsheet, or check out one of the many apps out there that help track things for you.

When you know how much you earn and how much you are spending, you will be able to make sure you don’t spend more than you earn.

That is the key to being able to get ahead financially!

For me, the most stressful thing about money is the unknown.

I feel so stressed when I don’t know how much money we are making or how much I should be spending on groceries, or if we’re going to have enough money to pay all of our bills.

The best way for me to stress less about money is to have a plan. I feel so much more at ease when I know how much income we have to work with and I can track how we’re spending/saving it. When I know that we spend less than we earn, I know that we are at least heading in the right direction with our money.

⇒ What methods do you use to to track your income and spending? 

bills yeah

The #1 Rule for Financial Success: You can get your finances heading in the right direction this week.

 

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Izy Berry

Friday 3rd of June 2016

I totally agree! Anything you can't measure, you can't really improve.

Christine

Friday 3rd of June 2016

That's a great saying! I love it!

Kim @ Three Olives Branch

Wednesday 1st of June 2016

It is so simple but amazing how many people do not do this! I completely agree that it relieves so much stress when you are aware of your situation and do not have to worry about anything.

Christine

Wednesday 1st of June 2016

Yes! One of my biggest motivations for keeping a handle on our finances is so that we don't stress about money.

Leah | A Rekaxed Gal

Wednesday 1st of June 2016

Great advice. While I do t know the exact amount I spend every month I have a pretty good idea. I do know it's a lot less than what I make each month. I use mint.com to track my expenses and budget. It's been very helpful.

Taria Shondell

Tuesday 31st of May 2016

My husband and I are currently just starting to keep track and keep account of every penny! Great post and great posts!

Christine

Tuesday 31st of May 2016

Thanks Taria! That's great you and your husband and working together to make your finances better!

Darci

Tuesday 31st of May 2016

I have a really hard time tracking where our money goes. Not good. Started reading Total Money Makeover and quit half way through. Not good!

Christine

Tuesday 31st of May 2016

You can do it Darci! It's hard at first but it's get easier. And it's so worth it! Keep trying.

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