Seeking peace of mind? Spend less than you earn

Just a couple of days ago, I was at Chitipa Inn having a cold one; a cold coke. As I sipped it away, somebody walked up to me and asked if I was the one who wrote the Personal Finance column in the Weekend Nation. I nodded. The man was so excited.

He ordered himself a bottle of Carlsberg Stout beer and went ahead talking to me ‘nangumuwonani waka patali mbwenu nkhuti aa! Munthu uyu nimweneyu nadi. Yayi nawonga kumuwonani. Uwu nimwawi wakuti nimufumbaniko pachoko akulu.’ (I just saw you from a distance and immediately recognised you as the one who writes the Personal Finance column. Let me take this opportunity to ask you one question’.

He made me feel good but uncomfortable a bit with everybody on the counter turning our direction. ‘Namunyinu ndalama zane nkhuziwona makola yayi. Kupokera ngati muhanya wuno mbwenu namachero zose zamala. Adada novwirani kasi nichite vichi, wana nitayenge namunyinu. Wangongole panyumba wakukata yayi (my salary does not last long, please help me, otherwise it will be hard for me to take care of my children. Debt collectors are always on my door steps)’.

I almost laughed but he was presenting his case with all the sincerity of somebody who was genuinely seeking advice. After some careful thought, I gave him one piece of advice: Spend less than you earn.

It sounds so simple, doesn’t it? Yet there are many people out there burying themselves in debt (spending more than they earn) or living purely paycheck to paycheck (spending exactly what they earn).

Hard though it sounds, simply spending less than you earn has a cascade of positive effects. First, you begin eliminating your debts.

Spending less than you earn frees up the money you need to make larger payments on your debts. Over time, they begin to disappear, reducing your monthly bills and giving you even more breathing room.

Second, you begin to save – you build up some cash savings in your savings account, enabling you to roll through emergencies (like a car breakdown or a job loss). You’ll also have the breathing room to start saving for retirement, paving yourself a great future for your golden years.

Third, your stress level falls. The knowledge that you have fewer debts, your emergencies are covered, and your retirement is being planned for does reduce your stress level. You sleep better, your overall health improves, and you feel happier about life.

Finally, you are able to explore possibilities closed to you before. When your debts are gone and you are spending far less than you’re bringing in, you suddenly have many more career possibilities. You don’t have to stick with your high-stress job – you have the financial freedom to move on and chase your dreams. You can live where – and how – you want to live.

All of that comes back to one basic principle – spend less than you earn. That statement actually has two parts, though: spending and earning.

Spend less

refers to the fact that you do need to cut your spending. The first step doesn’t need to be anything drastic – nor should it be. Many of the more extreme money-saving tips come from people who have already tried out the basic tips and love them, so they seek out more intense strategies to further cut their spending. I do this myself – I’m always trying out new money-saving strategies, discarding the ones that don’t work for me and keeping the ones that do.

On the other hand, he rest of the phrase, than you earn, points to the other part of the equation: increasing your earnings. Increasing your earnings gives you more money with which to get rid of your debts, save for your big dreams, and build a foundation for whatever future moves you may want to make.

In subsequent weeks, we will explore ways at reducing spending and increasing earnings.

 

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