Budgeting can be rephrased as “living within your means”. When you plan to spend less than you earn, you plan for success.

Budgeting can be rephrased as “living within your means”. When you plan to spend less than you earn, you plan for success. The phrase “live within your means” is one shouted by prophets and the financially prudent; a clarion call that oft falls on deaf ears. Looking at a typical budget, you see income at the top, followed by expenses and your net income at the bottom. If your net income is either negative (in the red) or below a comfortable threshold you have only 2 options:

  1. Earn more money
  2. Reduce expenses

Of course, those options are easy to look at on paper… living it is another thing. We are often conditioned to believe that we should have the latest, greatest things, that we are somehow inferior if we don’t have many of the possessions or services that those around us have. This is conditioning that, once recognized, we can begin to break down and realize the truth of our situation. We are in control of our spending. We can cut back in so many ways if necessary to save more, to reduce debt, to donate, to do whatever worthy thing we deem.

But the key to doing this is differentiating between good debt vs. bad debt and wants vs. needs. Once you do that, the rest is just a matter of character (defined as “the motivation to stick with a decision after the excitement of making the decision is over”).

More on good debt vs bad debt next time.