Silly Things People Say about Money # 5

Image by Gerd Altmann from Pixabay

Income and expenditure are opposite in not just their very nature but also in the behavior they result in. While it’s considerably hard to generate income, it’s as much easy to spend. So, most of us wonder why our incomes are so low but the expenses keep going up. The difference between income and expenditure is savings. If either of their determinants goes out of whack, savings suffer. So does investing.

If your expenses rise by the same amount as your income, you are actually no richer. Worse, if your expenses rise at a faster rate than your income, you could be poorer. To boost your savings and investing, you should work on both income and expenditure. Try to increase your income and at the same time control your expenses. A stupid theory to which many youngsters have subscribed to is let your expenses rise and that will motivate you to earn higher. That’s equivalent to saying that you start suffering from poor health because that will motivate you to become healthier.

The nature of expenses is such that they are not perceptible at the time of their occurrence. However, they add up to a large amount by the end of the month. Even harmless, small-time expenses can take away a major chunk of your income over time. In order to avoid that, delay your expenses as much as you can. Make them when you have to, not before that. If you follow this simple rule, you will realize that over time, some of your expenses simply disappear. In the normal course, you would have spent money on them because they looked too small or because you had money in hand. But as you tighten the noose around them, they get relegated to the point of extinction.

Another trick is to make your discretionary, feel-good expenses around the month-end, not at the start of it. This will help you better prioritize your expenses. We often end up making the negotiable expenditures before the critical ones. This results in diminished savings and a feeling of anxiety and desperation in the middle of the month. The need is to be disciplined from the start of the month.

And of course, the greatest rule is to save before you spend. Your expenses should be a remnant of your income after savings. Your savings shouldn’t be a remnant of your income after expenses.