This article was originally published on nurturingmarriage.org. It has been republished here with permission.
Wouldn't it be nice to never have to worry about money again? Dreamy! Unfortunately, that's not reality for most of us. While you may never be outrageously wealthy, you can absolutely achieve financial peace of mind. The key is to follow this one simple rule.
Everyone probably knows a couple or individual who has struggled with finances. Ironically enough, some of those individuals and couples are in different tax brackets. There have been plenty of people with high six-figure incomes who have declared bankruptcy. On the other hand, there are plenty of individuals and couples who never earned six figure salaries, yet successfully and comfortably retire.
How can this be? The answer is surprising simple. At the end of the day, it all boils down to this simple rule, and the rule is the same regardless of your tax bracket.
Here's the rule: INFLOWS > OUTFLOWS. In other words, spend less than you make. Then, save or invest the rest.
Duh. No big surprise there, right? If you were expecting some earth-shattering secret to success, then sorry to disappoint. But, I guarantee that following this simple rule will lead you to financial peace of mind.
Financial peace of mind isn't measured in dollars. It isn't measured by the size of your house, or the make and model of your car. And you don't even have to be "rich" to have it. Financial peace of mind comes from knowing you're financially secure because you have the proper planning and tools in place (emergency fund, adequate insurance, and more.) Having financial peace of mind certainly doesn't mean all your monetary concerns have fluttered away, but rather you have a plan and are making progress.
If your personal budget isn't balancing, there are really only two levers you can pull: the "income lever" or the "expenditure lever." While there may be short-term fixes to a tough financial situation, ultimately the only long-term solutions to financial problems are to either increase your income or decrease you expenditures.
If you're not currently in the situation where INFLOWS > OUTFLOWS, then one solution is to increase your income and earning potential. While this is definitely easier said than done, there are steps you can take. Do you need to pick up additional work or another job? Do you need more education? Have you reached out to people in your network to make sure you're aware of potential opportunities? Get creative. You'll be surprised at the options that are out there for bringing in just a little more money each month.
Sure, it would be nice to wave a magic wand and suddenly triple your income. But, most people don't have a magic wand, and I've never seen or heard of a legitimate "get quick rich program" that's honest and actually works. At the end of the day, there's no substitute for good old-fashioned hard work. You can absolutely climb the income ladder, but it likely won't happen overnight. Be patient with yourself.
The Expenditure Lever
More often than not, money issues are a problem with the expenditure side of the equation rather than the income side. As indicated at the beginning of this article, there are plenty of couples making healthy incomes who still find themselves in very challenging financial situations — even bankruptcy. Was the problem really that they weren't making enough? Doubtful.
Not only are expenditures usually the driver of financial struggles, but the "expenditure lever" presents the quickest way to fix those same issues. Typically, expenses can be cut in a very short amount of time, even overnight, whereas increasing income may take significantly longer.
It may feel like you can't possibly live on less, but if you take a careful look at what you spent money on the last 2-3 months, you'll likely find room for cutting back. This doesn't have to mean doing away with all the little things that bring you and your spouse joy, but maybe it means only going out to eat twice a month rather than twice a week.
If you're not happy with your current standard of living and you want to increase your expenditures, that's fine. Dream big. Reach for the stars. However, you should never make that move without first having an equal or greater increase in your income. Pretty simple, right?
The bottom line is you must manage your finances or they will manage you. If your financial budget is out of balance, then you will certainly lack the financial peace of mind everyone seeks. A lack of financial peace of mind can create an incredible amount of stress for individuals and marriages, and that stress can lead to additional problems that may hurt your relationship with your spouse. So, do yourself, and your spouse, a big favor and follow this simple rule to achieving financial peace of mind.
Aaron & April are the founders of Nurturing Marriage, a website dedicated to strengthening marriages. They enjoy playing football with their two little boys, watching sports, eating cereal late at night, and going out for frozen yogurt.