Wealth = Earnings – Spending
Posted by Gail | Filed under Saving
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery. Charles Dickens, David Copperfield
People are always wishin’ they had more money. It’s a funny thing really since it doesn’t matter how much money you make, a little more is always welcome. But most people don’t realize that the key to having money is simply not spending everything you make. It’s that simple. According the Gail’s Rule #1: You can’t spend more money than you make. If we could just get this one simple rule fixed in our consciousness we’d be well on the way to becoming wealthy.
It isn’t easy to spend less. While some Spurts would have you believe that spending less is easy – just don’t spend – it’s easy to say but a lot harder to do. Temptation to spend is everywhere. From the chicken that goes on sale at half price pressing your Stock Up button, to the fabulous pair of shoes you are salivating over, there is always a good reason to spend.
You have to buy groceries, right? A body’s gotta eat. And the kids are growing like weeds, so it’s always the right time to buy them another pair of runners or new jeans or a warm sweater. The car needs repairs and even if you do it yourself, there are things you must buy to do it right. Yup, spending money is dead easy. Not spending… now that takes some planning and a serious serving of self-control.
Perhaps the toughest part of implementing a No Spending strategy is the fact that the spending itch brings physiological rewards when it is scratched, while the urge to save often feels like denial. But you can turn that around if you can turn Not Spending into a game that offers it’s own rewards.
Play the Can You Find a Better Deal game to cut your home phone bill, your cell phone bill, your cable or satellite bill, your home and car insurance bills, your bank fees. People are often amazed at what they can save when they shop around and start negotiating with their service providers. And a savings of just a few buck over a bunch of budget categories can really add up. Put together a list of your regular expenses and figure out how to carve out savings by getting a better deal.
Tyler did. He wrote:
I have a story for you…my auto insurance was up for renewal, and came along with a $600/yr increase. I called the insurance company and within 10 minutes, they lowered my rate by $650…I actually came out paying less than I am now! Wish I had simply asked long ago!!
Turns out there’s a discount for where I work and I slightly increased my deductible – I have an emergency fund to cover that if I should ever need it. Now I’ve got the bug and want to take on the cable company next haha. Any tips?
Play the How Much Can I Save This Month game to see how you can cut back on a variable expenses category by investing a little time and effort into planning. Save on your grocery money by:
- planning your meals,
- using up all that stuff in your cupboards and freezer before you buy anything else except perishables,
- buying on sale,
- creating a buying group with a couple of friends and buying in bulk,
- usng coupons.
Save on transportation costs by:
- Walking
- Riding your bike
- Car-pooling
- Planning your trips efficiently
- Having one no-drive day a week
- Learning how to drive smarter to save on gas
Play the Spending Holiday game. How many days can you go without spending money on anything but the most essential expenses? Keep a calendar handy and each time you have a Spend Nothing Day, give yourself a star. How many can you do in a week? In a month? Okay, next month can you get more stars?
Accumulating wealth really does boil down to the simple rule “Spend less than you make.” If, no matter how hard you try, you can’t spend less, it may be that you have to come up with ways to make more money.
May 26, 2010 at 7:15 am
Gail, you and I must have been drinking from the same well today! Yesterday I was talking to a girlfriend about discipline, with regards to budgeting. I just wonder what’s the point that a person goes from looking at the chicken on sale and thinks “I’m saving money and we’ll use it up eventually” to “I don’t have the money for that right now”. This applies to everything of course, not just chicken.
Somewhere between those two states of mind, there’s a switch that gets flicked.
You are the only person I’ve ever seen that can reach into somebody’s psyche and pull that switch and still have somebody speaking to you after the fact. How do you do it, Gail? I think it’s the infectious laugh, and beautiful wrapped up in years of wisdom and practice.
May 26, 2010 at 7:19 am
We currently limit ourselves to 80% of our take home pay for spending. that way 20% is saved. Anyways I really like the How much can I save this month idea. I think we might try that out next month. Then try to beat it the following month.
regards,
Jason
May 26, 2010 at 9:00 am
Ah yes, the “just don’t spend” idea that’s easy peasy to follow! My husband laments over how much we spend in groceries, tells me that we don’t need to buy anything for the remainder of the week, and then comments a day later that “we’re out of X” and the kids complain that “there’s no food in the hoooouuuuussssse-ah”.
I think the bottom line to finding that comfortable place where debt’s getting paid down and overspending has stopped is just coming to terms with how sometimes there will be unplanned/unforeseen expenses, so you adjust that month and vow to get back on track the next month. For me it’s been a constant battle lately with finally having a workable budget and then having everything go to heck in the matter of a week with no less than $1000 having to be spent on emergency this or that, sending me into a spiral of frustration that I think I’ll never ever see the end of the tunnel.
After complaining last week about the vehicle repairs, glasses, etc., I finally decided this weekend that I’m happy I’m healthy, my family and friends are healthy, I AM chipping away at my debt every month, and that at least I have the money to put towards these “emergencies” and I can quickly reorganize the months’ budget and be agressive on debt repayments again next month. The debt is getting paid, maybe not as quickly as my pretty budget spreadhseet TOLD me it would be, but in the long run it is getting paid and I’m not adding to it. Yes, this month it might’ve only been $200 of the planned $1500 that was able to go towards it, but it’s $200 less than I owed last month. That’s the balance I needed to find, and it’s helped me lighten up on myself (for now). I’ve avoided the malls like the plague because I know I need a new pair of sandals (thanks to the dog’s incessant chewing habit), undies are falling apart and at risk of falling down while walking (okay, not that bad, but pretty darn close), and a new shirt or two would be a welcome addition to my sparse-echo closet. But my reward in June is to get these things IF there’s no other emergency. So if you hear of a woman walking out of her underwear some morning, feel free to say you might just “know” who she is!
May 26, 2010 at 9:01 am
I bought a new car after driving the previous one for eleven years and was shocked at the increase in insurance. I felt somewhat disloyal to the insurance company I’d had for many years but was able to get the same protection for about $600 less with a different company. I wish I’d looked for better rates years ago.
Now I’m looking for an inexpensive cell phone plan for emergency use only. I don’t use my phone for receiving calls. No one has my cell number so they leave a message on my home phone. I just need a cell phone for things like flat tires, vehicle malfunctions, or other emergencies. Any suggestions?
May 26, 2010 at 9:04 am
I’m trying something different in June. This month, when I got overtime, i just added it into the budget, and very little has been spent, so in June I’ll try sticking to my base amount, before overtime hours, and bank the rest.
I hear you on the temptation to spend, my boyfriend says he will need an air-conditioner this year, if he’s going to get any sleep in this heat. Problem is, along with the purchase price is an annual extra charge by my rental company of $200 for 3 months. It may have gone up too, since my building recently switched ownership.
May 26, 2010 at 9:38 am
Always a timely blog just when I/We need it most. It always amazes me that I lived on a lot less but I tend to spend what I make and still say I need more.
For the lady with the cell phone. I am pay as you go. It is more money per minute but when you are not using the phone it is better for me. I buy a $100 card that is good for 1 year. I have to top up before the year is up or I will loose any money still on the card but I find that I do use it up in about 10 months so this is not a problem. I also buy a card on the indian reserve near my home so I do not pay the tax.
Regarding insurance. I am an insurance broker. There are a lot of discounts that have been added that you might not have on your policy. Many companies give discounts for non-smoking, retired, mortgage free, age, and alarm systems. (Some for auto some for home) Even having the year you were licenced incorrect or the amount of kms you drive in a year too high can effect your premium. When your renewal comes in call your broker and make sure that they have the correct information. This can backfire as some things are chargeable like a pool or woodstove but if they don’t have the correct information they can cancel you so best to have it right.
Asking and being informed is the best way to go.
May 26, 2010 at 9:40 am
@ Sharon – Hobo air conditioning — put water in the freezer in containers, put fan in behind containers, turn on fan. Voila!
@ Michelle – and why do those tiny scrap of material cost so much nowadays anyways? sheesh
I have many multitiude of tricks I play on myself to force myself into saving. Generally, I do one month on, and one month off, so I don’t end up feeling deprived of that item at the time.
1. Hobo air conditioning as listed above – I’m not paying $70 a month just to have an air conditioner in the window whether I turn it on or not.
2. Don’t carry cash. You’d be amazed.
3. Don’t purchase *any* groceries that do not have over 50% nutritional value. If I do, has to come out of “allowance” money (which ain’t that much).
4. Freezer week – my partner is a hoarder, difficult to not have a freezer full, but every few weeks, we have a freezer week. And I’ve gotten him to stop stockpiling the expensive items.
5. Freezer weekends – this is when we cook meals that are easily freezable so that we have healthy meal options – usually frozen in single servings because sometimes we don’t always feel like the same item.
6. Pasta or Rice Pot – we cook an entire package of pasta, or large pot of rice and then have it several different ways within a week.
7. Play with knowledge – where before we would say “hey let’s go to St. Lawrence Market” without any thought to $, we now decide our weekend excursions based upon – how much do we think we’ll spend? so it’s more like, “we could go to St. Lawrence Market, probably spend between 20-30 or we could go for a walk to the beach and buy japanese lunch and have a picnic for 15″. We may still choose the St. Lawrence Market, but we know what we’re spending.
Happy saving All!
May 26, 2010 at 9:43 am
I always tell my clients that it’s not all about how much you make, it’s all about how much you keep at the end of the day that will determine how wealthy you become.
Great post Gail
May 26, 2010 at 10:15 am
I hear what you’re saying, and you couldn’t have been more timely. I’ve been following your budget plan for about six months, and have cut my spending down by a lot. Consumer spending has been cut by at least 2/3. My problem is dealing with the unexpected non-optional expenses, like the foundation repair and the new roof that my 5 (yes, five) year old house require. The builder’s MIA, and new home owner warranty won’t help, so I’m going to be $10K out of pocket; and that’s the best case scenario. I need to start cutting as much as I can, where ever I can.
Linda, if you are in Canada, Solo has a fairly good deal. It may have gone up, but a year ago you could get basic phone service (a few hours a month) for $16/month.
May 26, 2010 at 10:58 am
Linda,
We also had the same problem. I found a web site that compared cell phones. I am like you-no one has my number and it is not even on most of the time. It is only for emergencies. It was suggested that I get a phone from 7-11. Yes the convenenice store on the corner. I bought a phone for $59.00 and paid $25.00 for a card with 100 minuites that will last a year. Yes this year I had the expensive of buying a new phone but next year my cell phone bill will be $25.00 for 1 year. So far I have had no problems with it. Works fine for me.
May 26, 2010 at 11:19 am
Great post Gail. I just paid off my visa and am heading on an all expenses paid holiday by my boyfriend. I am using my variable expense money for that trip. I don’t wish to pull out the visa unless we have an extreme emergency which I doubt will happen, glad to know it’s in my pocket and empty.
May 26, 2010 at 11:43 am
I think I knew this, but it didn’t become dead-obvious to me until maybe in the last year. Now I can tell when I’m stressed and I have this strong urge not to even to own something, but to spend money – and I realize it’s a coping strategy, and it has to be diverted into a less destructive action..
Either way we did something bad… we are building a deck. That means that besides that 9k that is our emergency savings (thank you Gail for putting fire under our a$$ to do it), we will have an equally deep line of credit debt. Not the smartest idea… just had to come clean. So they do cancel each other, leaving us with no debt but with no emergency savings either.
Not the smartest.. and I will be doing penance for this for the next 2 years, while sitting out in the sun on the deck. Hopefully.
May 26, 2010 at 12:24 pm
Linda:
Pre-paid appears cheaper for emergencies. Just check the area that is covered WITHOUT roaming fees. Make sure it suits you.
Spending less than I make:
Easiest with automatic account transfer. What is left may be spent… but keep some aside for those oops expenses. If the balance on the credit card cannot be paid, the scissors will be needed! It’s a threat that works with me.
May 26, 2010 at 12:33 pm
CABLE
In this day and age no one needs cable. It’s shocking how many free tv shows and movies you can watch on You Tube. No illegal downloads necessary! And you can visit friends with tvs from time to time for social time that’s cheap.
PICNICS AND POTLUCKS
I go out less for dinner to restaurants and instead plan pot lucks, bbqs and picnics with friends. Since we all have dogs, it’s easy to entice my group of friends outside for social time.
FREE!
You’d be surprised how many free films are available to you. I live in Vancouver and am on Science World and Videomatica’s email lists. They both email frequently with offers of free movie tickets and events as long as you are one of the first people to reply/show up and claim a pass. Get on mailing lists!
The Georgia Straight also has a contests page on their website that allows you to enter to win tickets to shows. A one stop shop for show ticket lotteries.
CELL PHONE
The pay as you go is a great idea for infrequent users of cell phones. Also, remember that if all you are looking for is truly an emergency phone, any charged cell phone will dial 9-1-1 even if it isn’t on a plan of any sort. Perfect for glove boxes. Just remember to keep them charged!
HAIR REMOVAL
I would be remiss if I didn’t mention this again to you all…ladies, you can do your own waxing at home by making your own body sugar using honey, sugar and lemon juice. Recipe can be found at pioneerthinking.com. Easy peasy and oh so cheap! So much cheaper than going to the salon to get it done.
May 26, 2010 at 12:58 pm
Linda,
I’m like you – cell phone is for emegerncies only. Mine is with Virgin Mobile, on a special pre-paid plan that they don’t advertise: I pay $100 once a year, and the balance doesn’t expire for 365 days. That works out to $8.00 a month.
You should give Virgin Mobile a call; they only offer this plan if you ask. Their number is 1-888-999-2321.
Also, they have some pretty cheap no-frills phones too. They’re used (“preloved” is the term they use) – but you can get one for as little as $30, and they’re fully guaranteed to work.
May 26, 2010 at 1:54 pm
[...] This post was mentioned on Twitter by Christine Brandt, Jo Pastner and Kate Fullcot, 2 Cents. 2 Cents said: Gail Vaz-Oxlade: Wealth = Earnings – Spending http://b2l.me/w2g9h So simple and yet so difficult!
[...]
May 26, 2010 at 7:31 pm
LOVE this post, and love the ideas that people have shared.
I agree with Tyrone — it’s not how much you make, it’s how much you save. And it’s also about not adding to your debt.
I’ve been having a terrible spending urge lately — hot weather means co-workers are wearing new cute little dresses and sandals, while I’m still wearing my outfits from a couple of years ago… and no air-conditioning at work doesn’t make me look forward to going home to no air-conditioning… I think there are 2 of us on staff who don’t have air, but SHE has a pool…
So, I try to tell myself that my clothes may not be new, but they are of good quality, and cooler than many of the fabrics others are wearing (I prefer linen), and I don’t have the credit card debt to accessorize them! And, I have weekends to look forward to at our trailer (AIR-CONDITIONED with hydro included!), so it’s just holding out until then…
It’s hard some days… it seems that everyone is always buying something new…. and if I hear one more time about how worth it LULU clothing is, I think I will scream “It’s WORKOUT wear for crying out loud!”
I’m sure that they all must have piles of debt… but they act like they own the world, and anyone who doesn’t have name brand stuff, just isn’t as good as them… Luckily I just read the “Undomestic Goddess” novel by Sophie Kinsella, and it’s given me another temporary perspective
May 26, 2010 at 11:46 pm
@Michelle, if you’re finding that you have $1000 ‘emergencies’ each month, could you add a line on your budget for it? If you don’t use it one month, carry it over to the next, and pile the next month’s $1000 onto debt. Or just half, and use half for refreshing your wardrobe, or put into savings for the bigger emergencies.
I will definitely try the hobo a/c. My long-suffering, shift-working boyfriend has to try and sleep during the day, so if that doesn’t work, the a/c might be reasonable, considering the record-breaking heat we have now.
Reading the comments, I feel better, knowing that there are others struggling, and mostly succeeding, at getting their financial ducks in a row. I love this site!
May 27, 2010 at 8:05 am
That makes sense actually Sharon…maybe if I keep a ‘float’ of $500 for June and follow up with the same in July, then I’ll feel less stressed if something does come up. I’ve been working with a $0 based budget, so anything that isn’t allotted for regular bills gets divided into debt and extra unplanned spending. It just seems like the unplanned spending took over, so maybe if I actually budget $250 each pay this upcoming month for the unplanned things, maybe, JUST maybe, they won’t actually happen for a change!
Thanks for the suggestion Sharon. Good luck with the a/c. I would be driven out of my mind trying to sleep without a comfortable 24 degrees of a/c air…think Linda Blair!
May 28, 2010 at 12:49 pm
Excellent post Gail, and many good ideas about saving money. I found myself deep in the hole after a nightmare marriage and 4 years of depression (read: neglecting almost everything but breathing). Happy to say, my debt has been reduced in 14 months by nearly $20G and I have started an emergency fund. I have always contributed, though not maxed out, my RRSP… when that debt is gone in a few years I have a plan to split my debt repayment money between backfilling my RRSP, topping up my emergency fund at a much greater rate, paying off my mortgage and starting a “fun” fund…. yes, I deserve it.
I am not a shopaholic by any means. I live fairly simply, dress the same, am not a shoe hound, and don’t own a car. I do however have cable and a cell phone, but my plan works well for me and because I work for a major telecommunications company, I get nice discounts on all those services. There in lies one of my gripes.
Yes, you can shop around and get the best “deal” for your home phone, cell phone, etc, but always remember the golden rule: A company is not going to pay you to have their service just for the priviledge of losing money and having you as a customer. Remember that different people want and require different levels of service with just about anything, so please don’t expect that any company, be it telecommunications, insurance, or whatever, is going to give you the gold lined service at rock bottom prices. If you want basic prices, prepare to give a little yourself.
And my biggest beef is this – remember that on the other end of that phone is a human being… just like you. If you start to scream, swear, belittle, whine, threaten and demand, the natural reaction is to give you the bare minimum to get you to shut up and get off the phone…. and THAT is what you’ll get. There are “deals” to be had, but be prepared to be pleasant and polite…. you would be amazed how far customer service people will go to get you what you truly deserve.
Thanks for listening!
May 30, 2010 at 4:43 pm
love gail’s blog, as usual. such timely information (how often have i said that to myself lately?) and the responses always get me thinking. i am really new to gail’s website but have watched tddup for at least 2 years now, since i happened upon it one saturday night (i live in the usa and get 1 lousy hour of gail a week – need more, even re-runs!). haven’t missed an episode since and learn something every single time.
michelle, you had me practically in tears i was laughing so hard! i really needed your refreshing outlook and self-deprecating humor. thank you for sharing and articulating exactly what i sometimes feel. it’s good to be in the boat with others and i’m really thankful to have company.
not debt free yet, firmly on the journey! last month somehow i found nearly $300 in my budget – funny what the journalling, jars, a budget, and a huge dose of new-found confidence will do. again gail, thank you for helping me; i feel like your blog is written personally to me and i am doing all i can to be a good student.
and to those of you who post, know there’s a little soul out here grateful for all the discussion.
June 1, 2010 at 2:39 pm
This is so right on. I wish I’d learned these lessons earlier but better late than never. I’m trying and I’m posting my efforts and tools I’m using on my blog. If you want to check out my meal planner and recipes or even my daily planner (which includes checking my finances daily) and customize any of these for yourself, you can find it at:
http://expertssayyoucandothis.typepad.com/experts-say-you-can-do-this/get-out-of-debt/
June 5, 2010 at 1:07 pm
I am not sure why yahoo sent me here but I feel I should say I have become more or less entertained by the content you have patched together. How many week did it take to begin to get so many people showing up to your pages? I am new to this.