Once upon a time in the land of financial blogging experts, Sir Henry Save-a-lot proclaimed that if we focus on not over spending on the big items (cars, houses etc) then we will be on the road to financial freedom. On the other hand, Sir Harold Save-some-more thinks if you forgo your daily coffee and get rid of the small unnecessary expenses then you will experience this magical thing called financial independence.
I read a few personal finance blogs and usually the blogger is in one of the camps above. I don't agree with either. For me it doesn't really matter. Quite simply, spend less than you earn. Sounds simple enough but very few of us do it. I try do it every month and it is very difficult. Lately, I haven't been very successful. It is the usual story. I am married with a kid with more kids to follow at some stage. It certainly makes it difficult but we all have challenges in life. We have to do better.
Here is my list of no-no's:
- Buying a house you can't afford (big thing)
- Buying a car you can't afford (big thing)
- Sending your kid to a school you can't afford (big thing)
- Eating only at fancy restaurants (small thing)
- Using retail store credit unless absolutely essential. Do you really need those jeans? Or can they wait until next month (small thing)
- Trying to keep up with the Joneses (big and small)
- Buying any of or all of the above and then having nothing left for your savings
Monthly Income = Consumption + Savings
So, spend less than earn. Repeat that every day. If you find it difficult, look where you are spend money now. Use an app like 22seven if you have to. We often have more wriggle room than we think. Necessities are far often only wants.
And let me be clear. You don't need to be a scrooge. Spend money! Go on holiday! Experience life! Just don't spend more than earn.
What do you think? Are you in the big or small camp or a bit of both?