Spending Less Than You Earn

I hit on the main ways of diagnosing your financial health in this past post.  I'm going to use Wednesdays to go further in depth on each point since I truly believe that financial health leads to less stress and happier lives.

The first point was to spend less than you earn.  This means that the money you have going out needs to be less (hopefully a lot less) than the money you have coming in.  Constant, overwhelming debt is not healthy for you or your future.

List Your Income and Expenses
In order to spend less than you earn, you need to know how much you earn and how much you spend.  I'd suggest writing down your known monthly income and expenses first.  Then spend a whole month adding anything you missed to that list.  Not only will this be a definitive picture of your spending and salary, but it will give you a great start on beginning a budget as well.

Ways to Widen the Gap
If you are not where you want to be once you've seen this list, you do have options:

1)  Decrease your spending.
2)  Get a better paying job.
3)  Find other income sources.

Decrease Spending
To decrease your spending, I'd suggest first cancelling or discontinuing any expenses that you really don't want or need.  Don't go crazy or be regretful...simply cut the fat.  I was surprised at some expenses I forgot about when we started tracking our spending.  It was easy to cut out an $8 monthly online game membership fee and a $25 a month gym membership since we had stopped using both of those.

If that doesn't solve your problems, then look to cut expenses that you might want, but don't really need.  Luxury expenses can wait until your income increases.  I'd consider internet and a cell phone as almost-necessities, but cable isn't.  I'm sorry since I love cable, but if you aren't making more than you spend, it has got to go.

Income Ideas
If you still aren't there yet after getting back to the basics, then you need to look at increasing your income. 

Obviously, only you know you well enough to get a better-paying job.  Other income sources are also a personal matter.  I worked for a book store for $7 an hour for 3 months in order to make a little part-time cash.  I've also babysat and taken care of pets.  I've most recently started a blog, although I wouldn't consider this a great way to make fast money (I've made about $10 in 2 months).  My husband is a contract sports official for middle school and high school football and basketball.  He can also tutor.  What sounds good to you?

In short, you need to spend less than you earn to stay fiscally sane.  I prefer to spend much less than we earn since we have an early retirement goal.  Look at your situation and access your options to make this happen.  Good luck.

Are you spending less than you earn?  If so, are you happy with your position?  If not, did this article help?  Does anybody else have any suggestions on this point?

Need Money? Have an Extra Bedroom?

A year after my husband and I bought our 3 bedroom home, a friend needed a place to stay for a little while. Our guest bedroom was open and our friend was living in an overpriced hotel. When he offered to pay $350 and half of the utilities per month, we happily agreed. Since our mortgage payments are only $740, it was a win-win for everybody.

Three months later, our friend moved on. We thought we’d love having complete privacy again, but we missed the money more. After a 20 minute discussion, we decided to list our spare bedroom on Craigslist.

I knew nothing about actually renting out the room, so I looked up ideas online. I listed the room in detail with pictures of the spaces that were being rented out - room, bathroom, laundry area, and kitchen. I asked questions on the phone about pets and smoking habits. When they showed up for our scheduled meetings, they filled out their job and housing history and signed off on background checks.

I’ll be honest, I knew exactly who I wanted to live with by the time they walked back to their car, but I did a background check and verified their employment anyway. We signed a lease the next weekend.

He was the perfect renter. He paid on time, cleaned up after himself, and stayed over at his girl friend’s house more often than he was ever around ours. He stayed for a little more than a year. Dude, if you’re reading this, we miss you.

We quickly relisted the room since we were so happy with the set up, but we didn’t get as much response. When we finally found someone we were okay with, he ended up being completely immature and flippant. He even ordered a different cable service for his room since he didn’t like the one we paid for...without telling us. Needless to say, it didn’t work out and he moved out in less than 5 months.

At that point, we decided that our stress-free life was worth more than $500 a month.

So, yes, renting out a spare room can be very helpful fiscally. Just be careful to properly weigh the costs and benefits of the situation for yourself.

If my husband and I ever need some extra money again, this would be our first choice. Even though our last roommate was a putz, we never had any real issues. We just didn’t need the money as much as we craved a place to ourselves again.

Do you need any extra money? Would the rental rate in your area be worth more than your complete privacy? As always, it’s a personal decision, but it’s good to know all of your options, right?