When a chef overcomplicates a meal, the food tastes bad. When a musician overcomplicates a song, it sounds noisy. When a saver overcomplicates money, they struggle to put any in the bank.
With all the fancy financial jargon and all the trendy advice and fad savings plans out there, it’s no wonder it seems like you need a degree in finance with a minor in economics to stop living paycheck to paycheck, but—breathe a sigh of relief—you don’t.
The science behind saving money isn’t actually science at all. Don’t be intimidated. Don’t let the world overcomplicate it.
Spending Less than You Earn
Let me break this out. To save money, you need to know how much you earn and then spend less than that. Voila. Simple. Anyone can understand it.
So few of us do it.
Simple but Not Easy
While the concept behind spending less than you earn is simple, it’s more difficult to accomplish than it seems.
There are three primary reasons people spend more than they earn (i.e. take on debt) or exactly what they earn (i.e. live paycheck to paycheck).
1. We focus on increasing income rather than reducing expenses.
Ever thought to yourself, if only I made a little more money? We all have.
But which is easier, convincing your boss to give you a raise or reducing how much you spend eating out each month?
We have far more control over our expenses than what we earn, so it’s better to focus our efforts there.
2. We mislabel wants as needs.
We may need a phone, but we don’t need the latest model and an unlimited data plan. We may need a car, but we don’t need the new car smell and a navigation system.
It’s very easy to mislabel things we want as things we need, and this often increases our spending beyond our earnings and leaves us feeling as if there’s no room in our budget to save money when there actually is.
3. We are paying for past mistakes.
The financial world is filled with pitfalls that can haunt people for years and years.
You may have bad credit. You may have a pile of debt that engulfs far too much of your income. You may not have an emergency fund but you’re faced with emergency after emergency.
It’s difficult to overcome these hurdles, but don’t give up. It’s not impossible.
Sometimes you’ll face choices that aren’t simple. Sometimes you’ll sacrifice, but know that once you overcome your past, there’s an easier future ahead. A future where spending less than you earn keeps you from acquiring debt and making these mistakes again.
Adam Lucas holds a Finance degree and an MBA from the University of Kentucky. His work has appeared in many major outlets including AARP.org and GoBankingRates.com.