Chapter 3

Managing Where Your Money Goes


check Understanding why people overspend

check Assessing your spending

check Tracking your expenses via “free” websites

As a financial counselor, I’ve worked with people who have small incomes, people who have six-figure and even seven-figure incomes, and everyone in between. At every income level, people fall into one of the following three categories:

  • People who spend more than they earn (accumulating debt)
  • People who spend all that they earn (saving nothing — breaking even)
  • People who save 2, 5, 10, or even 20 percent or more (growing savings)

I’ve seen $40,000 earners who save 20 percent of their income ($8,000), $80,000 earners who save just 5 percent ($4,000), and people earning well into six figures annually who save nothing or are adding debt.

Suppose that you currently earn $50,000 per year and spend all of it. You may wonder, “How can I save money?” Good question! Rather than knock yourself out at a second job, you may want to try living below your income — in other words, spending less than you earn. Consider that for every discontented person earning and spending $50,000 per year, someone else is out there making do on $45,000. ...

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