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 often falls on deaf ears. Looking at a typical budget, you see income at the top, followed by expenses and net income at the bottom. If your net income is either negative (in the red) or below a comfortable threshold you have only 3 options:

• reduce your expenses
• increase your income
• or some combination of the two

Of course, those options are easily accomplished on paper-living it is another thing. It’s hard to curtail our expenses. We are conditioned to believe that we should have the latest, greatest things and that we are somehow inferior (or deprived) if we don’t have many of the possessions or services that those around us have. This is social conditioning that, once recognized, we can begin to resist. We will realize the truth of our situation: we are in control of our spending.

We can cut back in so many ways so that we can save more, reduce debt, and have money to donate, or whatever other worthy things we choose to do. But the key to accomplishing this is being able to differentiate between wants vs needs and good debt vs bad debt. 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 wants vs. needs and good debt vs bad debt in future writings.