$pend less than you earned & Live $marter

Being young and financially irresponsible is great fun, but being old and broke stinks.

Mr Micawber in Charles Dickens’s David Copperfield sums this up:

Annual income twenty pounds, annual expenditure nineteen ninety-six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

It is amazed that how many people flout this simple but most golden of all golden rules.

Spend more money than you make, this doesn’t sound logically possible. If you only make RM1,000 a month, how could you possible spend RM1,200 a month? Think of it this way. If you take two steps forward and then three backward, you have essentially taken one step backward. The same goes in respect to personal finance. If you get your paycheck and then go spend more than what you were just paid, you have lost money. It’s easier that you think. So easy, you might be doing it. Dipping into savings, borrowing from others, or buying on credit card are the primary ways of spending more money than you bring in. You might be able to get away with doing this for a few weeks or months, but soon, your hole-digging habits will catch up with you. Before you know it, your savings is depleted, your credit cards are maxed out, and you can’t borrow any more money.

Strive to live within your means – not some Hollywood fantasy. For those who are living way beyond their means not saving and waiting for their windfall, they need a wake up call. Put together a budget and live beneath that budget. Control your spending and allow yourself to create a little bit of savings, with which to generate more income. In the New York Times Best-seller, The Millionaire Mind by Thomas Stanley was shocked to find that most millionaires live below their means. For example, they prefer to repair or refinish things, rather than buy new. They believe that financial independence is far more important than displaying high social status.

A small change in mindless spending can translate into serious savings. You do it regularly, and the compounding works miracles.

It is not how much you earn that is important. It is how much you keep that matters. You don’t need to borrow more to get more stuff, because all that means is you’ll have to work more to pay for it.

Living below your means is the secret to prosperity.