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Reduce Financial Stress with a “Two-sided Coin”

1/6/2008, 11:18 am

Spend less than you earn.

Earn more than you spend.

These two statements mean the same thing and doing them will accomplish the same result. However, they approach sound financial management from two different directions. They are, so to speak, two sides of the same coin.

Spend less than you earn.

This is about controlling your expenditures. If you earn $2,000 per month, do not spend more than $2,000 per month. Reducing expenditures may not be easy, but many people can do it if they are willing to give up something that is not necessary.

Some call this the “latte factor” and they encourage people to identify the daily latte in their lives and then give it up. Of course, if you drink a $4.00 latte every workday and quit it, you’ll save about $80.00 a month if you work 5 days a week. And while that $80 can be helpful, there are other important ways to reduce expenditures.

Did you recently pay off your vehicle? Unless it’s literally falling apart, consider going a year without buying a new one. Save $400 a month on car payments instead. That’s $4,800 per year you’ll save. So, what if it needs new brakes? Spend a few hundred on a new brake job and you’ve still saved $4,500 a year by not buying a new vehicle.

Earn more than you spend.

Here’s the flip side of the coin. Once you’ve pared your expenditures to what you actually need, the other variable in the equation is income.

Think of ways you can increase your income. Stuck in a dead end job? Hang onto it while you search for another with a higher salary. Have a hobby that you enjoy so much you can’t stop? Find a way for it to provide income for you? Have too much stuff? Sell it!

The two sides of the coin of sound financial management are to spend less than you earn and to earn more than you spend. It’s basic, but too many see only one side of the coin and miss out on opportunities to reduce their financial stress.

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