Spending less than you earn: golden rule of personal finance

Spending less than you earn is the basic rule of personal finance. It’s simple: when you spend more than you earn, the repercussions don’t just affect your budget, they also affect your life in several other areas. Often, in an overwhelming way.

Okay, but what can you do to solve this problem? How do you make “excess wages at the end of the month”? Here are some useful and practical tips, which, if implemented with discipline, perseverance and patience, can lead you to a more balanced and responsible financial life. They work very well with me and my family.

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Stop buying in installments

Remember that purchases made in installments compromise your future cash flow to the extent that a portion of your future paychecks will already be “consumed” by one or more debts. Be in control of your desires and, if the product you are looking to buy is indeed a necessity, make a good plan to try to pay it off in cash.

Stop trying to impress others

What is more important: your happiness or your apparent happiness? Many people think this second item is more important and, worse, identifies the appearance of happiness in the goods that most “appear” in the eyes of others, such as cars, clothes, electronics, etc.

From the moment you are more concerned with yourself, you will be taking a big step towards a life that is also financially happier.

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Value what you already have

Often, in the eagerness to buy a particular good, motivated by consumerist appeals in the media, we forget to value what we already have and which satisfies us fully.

Record your expenses

To paraphrase Mauro Halfeld, “Everything that is measured is better controlled”. Have an effective control of your expenses, from the largest – which are normally payments for durable goods, such as car and home appliance financing, and property rental/financing – to the smallest, such as snack bar and bakery accounts.

You need to see where your salary is going and, from there, reflect on whether it is being well spent.

Have plans for the future

The secret of financial well-being does not lie in the future that certain goals describe, but in the changes they bring about today, here and now.

Once you set goals for your future – such as a vacation, a retirement plan, or buying a home – you are motivated to spend less in the present. Consequently, there will be a stronger reason to save, which will help increase your chances of making money left over at the end of the month.

Have plans for the present

Purchases made under the influence of negative emotions are almost always bad purchases, because you will be trying to compensate for an adverse psychological state – such as sadness, anger, depression – with a good on a physical level.

The correct thing is that, whenever possible, purchases are the result of rational choices and do not compensate for adverse psychological states, but rather reward you for fulfilling previously defined objectives.


Spending less than you earn is essential for your finances to be balanced. Without a balanced financial life, it is almost impossible to have an equally stable and harmonious life in its non-financial aspects.

With simple and easy-to-follow tips, like the ones mentioned above, it is possible not only to make money left over at the end of the month, but also to create spaces of freedom in your life, where debt bondage is just a vague reminder of the past and the future of financial independence points to new and tasty achievements!

Translated and adapted by Bill Pay

Source: Dinheirama