The best way to spend more than you earn is all wrapped into one word, some of whom consider it to be dirty: Budget. The way you determine what your budget should be is what your priorities are. For example, paying things like food and rent are far more important than activities that are recreational like going out to eat – unless it is somehow tied to your job. Even if it is tied to your job, you could probably get a partial refund on that from Uncle Sam.
The next best thing you can do to avoid spending more than you earn is to pay as much as possible with cash and limit the amount of credit cards you use if you choose to open any. Ideally, you do not want to have any credit cards. Even minimum payments on credit cards are often an extra $50-$100 a month or more depending on the card you use and the balance. Chances are good you are paying 10 to 20 percent interest even if you have good credit, which leads to the next best thing you can do.
Don’t rely on credit cards for everyday expenses. When you use an actual bank account, since you actually have to have the money as opposed to paying it off later you are much less likely to spend it. The other risk you run with routinely using credit cards for every day expenses is that if you start to run short on money,. Let’s face it, it happens to all of us at one time or another so it will happen- then you will start to use it even more and you will accumulate more debt, and adding money to your budget that you probably do not have.
Even better yet, if you use cash for everything then running out of money becomes an impossibility. In a matter of fact, Financial Peace Guru Dave Ramsey actually recommends what he calls the envelope system.
The way the envelope system works is each time you get paid you take out the amount of cash budgeted for that pay check for each item on your budget. Then once you’ve gone to the bank and you get the money, put the cash into each envelope and then once the money runs out for that pay check that’s it. You spend no more on that budget item. This is all according to Dave Ramsey’s web site.
So what should you do if you don’t currently have a budget? On a piece of paper write down how much you make in a month. If you are unsure of that, then look at your pay checks over the last month and then add it up. Next, take all of the monthly bills like rent, electricity, cable etc. and then add them up. Also try to figure out how much money you have spent on food, clothing. etc. Once you have all that figured out, then cut back on what you can. For some utilities you may be able to negotiate a lower rate.
If you eat out four or five times a week, then chances are you are going to save a significant amount of money eating in more frequently. The reason for this is because it is cheaper to buy food at the grocery store than it is at a restaurant. Plus you are going to spend significantly less on gas going to the grocery store once a week than you are going to the local restaurant four or five days a week.