In Thomas Stanley’s book Stop Acting Rich, he presents research that shows that most millionaires in this country don’t have super fancy well paying jobs, but that it’s just everyday folks who do a really good job of saving and spending within their means.
To illustrate this, he shows some example of the different spending habits of people.
He talks about a very small segment of the population that he calls the Glittering Rich, a group of people that truly are wealthy enough to be able to spend their money on whatever goods they want without running out.
These are the people that we wish we were, but it probably isn’t going to happen. Not to say it couldn’t, but I’m not sure that chasing after this amount of money just to be able to spend that much would be worth it anyway.
Then, there’s the Aspirationals, a large segment of the population that want to appear rich. These people spend all of their money and then some trying to attain the trappings of success. This is the typical American, who doesn’t spend within their means and doesn’t do a good job of saving their income to build wealth.
This is the camp that we don’t want to find ourselves in. And if you’re feeling a little guilty because that’s been you, I’m here to tell you there’s no shame. Me too. But we want to do the work to not be that type of person.
Fight for the Margin
Taking control of your finances is all about creating enough margin that you can actually do something with your money now and save it so that your future is secure.
Margin is that extra between the expenses that you know you’ll have this month and the income that you’re bringing in.
If you’ve reached a point where your spending has caught up with how much you’re earning, there’s no space to get ahead. Each month, you make money and each month, it goes right out the door.
We need margin to feel like we’re getting ahead.
When you have margin, you can save for an experience. When you have margin, you can pay off your debt.
We’ve got to fight for that margin in our finances. And it all comes back to spending within our means.
No matter your current earning, you have to spend within that amount of money.
Earning More can Increase Your Margin
Our finances are ruled by a simple equation.
Income-Outgo=0
When we do a zero based budget, that means that every single one of our dollars is budgeted and accounted for. Every dollar has a specific job.
If we’re finding that we don’t have the margin in our lives to make progress with our finances, we can cut our expenses.
That’s largely what the personal finance realm has focused on. And it’s something that you can largely control today, which makes it powerful.
But you can also play with the other dial on that equation, which is the dial of earning more.
And the beauty of earning more is that it can look different for everyone.
Earning more to you may be doing woodworking in the garage and setting up an Etsy shop.
Earning more to you may be joining in to a network of friends that sell a product.
But it doesn’t have to be a side hustle. Side Hustles have gained a lot of popularity in the last several years, but earning more to you may be focusing on learning a new skill in your job and becoming more competitive so that you’re the one that’s selected for that promotion at work.
There’s an unlimited amount of things you could do to earn more, and the deciding factor simply comes down to you following the thing that interests you the most.
As Income Increases, Spending Can’t
To enjoy those benefits of earning more, you can’t simply increase how much you’re spending.
Use that extra money to go towards your debt goal faster, to reach your savings goals faster, or to intentionally spend in ways that you know you want to.
Make sure that you don’t earn more only to carelessly spend more as well.
When setting financial goals, use any extra income purely to help you reach that goal. If you’re paying off debt, use that income to get there as fast as possible.
Don’t allow yourself to do this great job of increasing your income and it all just go to spending.
Use that extra margin to gain ground.
Spend within your means
So make sure this month you’re spending within your means. You’re spending within the money that you’ve earned.
It’s so easy to look to the future and justify purchases now, but we’ve all got to make sure that we’re only spending what we have at the moment.
Use your budget as your tool to stay on Track.
Assign every dollar.
Realize that you won’t get it right the first time.
Keep your budget simple.
Spend within your means.
Remember that you can do this. If you haven’t started keeping a budget, get started today. The hardest part is just getting started. After that, the goal is just to move one step forward at a time.
Jared
Leave a Reply