“Its not your salary that makes you rich, its your spending habits”

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How many times have you gotten that good paying job or that raise at your current job and felt that you were finally on your way to doing better financially, only to find yourself in the same financial position you have always been in; living paycheck-to-paycheck and unable to save? This is because the more money we make the more money we tend to spend. Once we get an increase in pay, we feel that we can now afford certain things that were once out of our reach. We tell ourselves that we “deserve” to treat ourselves! We buy a better car, move to a bigger house or apartment, and start buying things we once could not really afford. These are a few tips to avoid falling into this trap:

1.) Decrease your bills. Although you may have an increase in income, you should still try to reduce your expenses so that you can really capitalize off the increase. Renegotiate or get rid of your cable bill, coupon, and eat out less. Cell phone companies usually provided discounts for family plans so it would be beneficial to combine plans if possible!

2.) Pay off Debt! There is no bigger threat to financial security than debt! When you get any extra disposable income it should be used to pay off any debt you might have. If you are past due on any bills pay them until they are current! Over the limit on your credit card? Pay it down! Before you even think of accumulating more bills, you should have no past due bills or debt.

3.) Save! Instead of thinking about what new car you can get approved for with your new increase in income, start thinking of how much you can save! Once you have paid off any debt or bills you may have been behind on, then you have to start paying yourself first! Start with saving at least 10% of your income. 10% is just a starting point. You always want to maximize your savings rate so don’t get comfortable with the 10%. You want to do whatever you can along the journey to increase your savings rate! As you get raises you should alway increase your savings rate; not your lifestyle cost! Do not make it an option; treat your personal savings as if it were a bill! If you do not make enough to pay yourself at least 10% and pay your other bills, then you should refer to tip #1 and look into decreasing bills that are not a necessity and then going to tip #5 and increasing your income.

4.) Invest!  Once you accumulate you savings there are many types of investment vehicles that you can look into.  Some examples are real estate, the stock market, or a business start up.  Basically you want to put your money to work for you in a vehicle that is going to give you a return on investment that aligns with your risk tolerance. 

5.) Continue to Grind! Sometime when we start seeing more disposable income, we stop our side hustle and slack on our grind! If you ever want to accumulate any assets and wealth, you have to work as if you are broke! Remember, the goal is to get out of the paycheck-to-paycheck cycle!

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