Income = Expenses + Savings
As simple as this sounds, most people fail to understand this common equation. A lot of everybody’s money problems would be solved if we all decided to stick to this rule.
The basic premise of this fundamental equation is that your expenses + your savings should not exceed your income. Depending on your pay schedule, you should be aware of you weekly/biweekly/monthly income (after taxes). Take that number and in-grain it into your mind. Focus on that income amount do not let your expenses and/or savings exceed that amount. Taking charge of your finances involves discipline in many respects and this is the first rule you must learn to be disciplined in.
Getting your money on the right track involves changing your mindset. No longer should you exceed that income level with your spending. From here on out, splurging now will result in sacrifices later. On the contrary, saving now will result in splurging later. I often pack my lunch most days so I can afford to go out to eat one night during the week. Nothing feels better than for me to come to the end of the month (my budget period) and to have a nice amount leftover. I can go out or buy something nice and not feel bad about it.
One of the many downfalls of society is the focus on the here and now. Thanks to credit cards, we can purchase now and worry later. Unfortunately, many consumers continue to purchase now and unfortunately, the worrying comes back to haunt them in a very scary debt-like way.
Start thinking of your income level as your spending ceiling. That is the max you should allow yourself to spend.
“My paycheck minus my expenses and anything I put to savings should be a positive number”
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[…] 1. Income = Expenses + Savings […]