It is The Difference That MatterTo improve your lifestyle, you will need more money that can be spent (called 'disposable income'). And where you can get this "disposable income"? It's from the difference between your income and your expenses. For example: if you earn $2000 per month, and say the total of all your expenses (bill, rent, groceries, transport, phone, electricity, gas, etc) is $1800, then you will have $200 of this "disposable income" which you can use to finance your lifestyle.
So, yes, increasing your income can certainly improve your lifestyle (at least temporarily), but the most important one is controlling your expenses. Do you still remember the last time you have a pay rise? After a while, where the money went? Also how many times we heard or read the story that people who win the lottery, after several years most of them actually just go back to where they were, or some even in the worse condition ? Or the other way around, do you have a friend , a neighbor or a family that you know exactly doesn't have that much income, but seems to be able to enjoy the good stuffs, maybe regular holidays, dine out more frequently, etc.
All of that is a proof that having a good amount of disposable income to put more money to your pocket, that can be used to improve your lifestyle, is not fully depended to high income.
Have More Money For Your LifestyleSo, here is a quick and proven way to have more money from your current income (no need to wait for pay increase). You generally see the result on or after 2 months (Sorry, not as quick as you probably expect, but you will get significant improvement). Here are the steps:
- Step One: You MUST have a monthly budget. To control your expenses (hence create more disposable income) you need to know exactly where you spend the money. Making a budget does not require too much complexity. A pen, a piece of paper and 15 minutes: that's all you need. Click here for more detail instruction.
- Step Two: Set Your Disposable Income Goal. With budget in hand you now know the theoretical maximum of your disposable income. If this number does not satisfy you. Set additional money you want as a goal. Where you got the money? By slashing any expense on your list that can be reduced or slashed.
- Step Three: Execute your budget and analyze the result. Spend the money as what you write on your budget with one exception: (just for the first month) hold off any lifestyle spending. The reason is, at the end of the month (more importantly the first month), we want to know exactly with actual real money in hand whether you have the amount of disposable income you set in step 2 o not. If not, you need to know why. Maybe some expenses is not accurately calculated, or maybe something unexpected came up, etc. So, after the analysis, now not only you have real cash for your lifestyle spending next month, but also you know exactly why you fail or success following the budget.
- Step Four: Keep doing Step Three above : Obey your budget!. Remember, the lifestyle spending for this month (dine out, movie, special week end, cigarette, new TV, etc) comes from the money from the previous month. (That's why only for the first month you need to sacrifice your lifestyle spending). Update the budget every time you have pay increase or some significant change in your financial life.
Have a good day !
p.s: don't forget to let me know what you think on comment area below. Or if you have some question, just shoot.
The author is an engineer, investor and director of investment company in Sydney. He is also blogging about financial matter on http://financebyme.com.