Something that I have been very clear for many years is that it is much easier for people to earn money than to accumulate money , that is, to save and invest.
It may seem like an amazing sentence, but just look around you at the people around you, and you will realize that it is totally true. At least in most cases.
Many people who have medium or high salaries later turn out to have nothing saved. They have never heard of an emergency fund and let’s not say having money invested.
This situation causes that for many people, losing work means having economic problems automatically . Since they don’t have enough savings to cover their expenses and with unemployment and compensation they can only cover a part.
This happens because many people spend without thinking about tomorrow , without saving and without investing anything.
Why is it easier to earn money than to save money?
There may be a few theories and opinions about the reasons that explain this situation. My belief is that we live in a world that loves consumerism above all things.
Society revolves around consumption as a positive value . Therefore, it is difficult to choose not to consume, that is, save and invest. It is very difficult to find a positive value in saving money. Nobody wants to be called stingy or others to think that he will be “the richest in the cemetery.”
This together with the thought that it is better to enjoy now because in the future we will see, makes the majority spend all or a good part of what they earn per month, without saving or investing. So he is naked in the face of the economic problems he will have in the future.
That’s why I think it is much easier to earn money than to save money.
So what is the real challenge of personal finance?
The key to knowing what the real challenge of personal finance is in the difference between what you earn and what you spend each month. That is, what you save monthly.
For someone who lives a day, spending everything he earns, this difference is zero. If you also have debts by credit cards or personal loans this difference is negative.
So the real challenge of personal finances is to overcome the temptation of consumerism, be aware of the importance of saving and make the difference between income and monthly expenses positive and, little by little, become bigger every month.
Without focusing, even a little, on spending less, you will never improve your financial situation. You will never achieve financial independence.
Solution to an economic problem is to earn more money
Earning more money is an important piece, of course, but in a society oriented so much towards consumption, it is far from being the ideal solution.
Why? Because in all likelihood even if you manage to earn more money, if you still don’t have the discipline of saving, you will end up spending that money as much as the rest.
If your monthly expense grows at all times to match your income , you will never be able to save and invest and you will really be going around in circles, in the same precarious financial situation.
The only way for you to succeed in the game of personal finance is to make the personal objective of making your income always higher than your expenses a priority. And focus on making this difference as big as possible.
How to make your income higher than your expenses?
To achieve this goal you must work two objectives at the same time.
First, focus on earning more each month . Improve your work, be more efficient, look for a promotion. If this is not possible, study the labor market and find better opportunities in other companies, or even look at the possibility of working on your own.
Another option is to create a small parallel business, which you can develop in your free time and that brings you extra income.
Second, focus on spending less . Analyze your expenses and always ask yourself, is it really necessary that I spend my money on this? You will realize that many of your expenses are totally unnecessary.
Reducing the amount of those expenses that are essential
The goal is to reduce expenses as much as you can so that the difference between your monthly income and your monthly expenses is as bulky as possible.
Then, use that extra money to eliminate your debts, build an emergency fund that covers you against possible unforeseen expenses and invest.
It is the only safe and effective way for you to go step by step building your financial independence . It is hard work because it requires:
- Patience, the results are not achieved overnight.
- Constancy, it is a daily job to be attentive to your expenses and look for ways to increase your income.
- Self-control, so as not to have a bad day and spend in excess.
But of course the great rewards, and I assure you that financial independence is, require a great effort. Nothing important is free.
The real challenge of personal finances is to create a difference between your income and your expenses every month . And make this difference grow little by little to have money that you can save and invest.
If you succeed in this challenge, you will succeed in all your financial goals.