You want to know how to get ahead financially? There is one sure fire way, and the best part is that it is fairly easy to do. So why are so many of us in such poor financial shape? It is because we do not follow this simple rule. What is this rule? It is spend less than you make.

That is it. My guess is you knew that right? If you can just follow this tip, you will be in good financial shape. Let us look at how spending less than you make puts you in better financial shape.

Get In Shape: How Spending Less Than You Make Benefits You

First off, when you spend less than you make, you are able to save. This money that you save can go into various pots:

Emergency Fund

Retirement

General Savings (think vacations, gifts, toys (both for you and the kids)

General Investing

The extra money you have left over at that end of the month can be saved/invested and grow into larger amounts of money through the years. You will discover the benefit of your money working for you, growing without you doing anything, instead of you working for your money.

The next benefit of spending less than you make is that you avoid debt. Debt is bad because it ends up costing us more over time. When you buy something for $100 on your credit card and do not pay it off, you start accruing interest. If it takes you a few months to pay it off, you have spent the $100 plus another $15 in interest charges. That $100 item suddenly cost you $115.

When I bought my house, the lender gave me a sheet showing me how much interest I would end up paying on my house over the 30 year loan. I bought my house for $167,000 but with interest, my total payment would be over $300,000! Talk about eye opening!!

How To Spend Less Than You Make

OK, I have just showed you why you need to live within your means, now we get to the part where we learn how to actually do it.

There are a handful of ways to go about it and I list many below. You can use all or some of these tips, whatever you need to actually spend less than you make.

Pay yourself first If you can learn to pay yourself first, you will automatically be setting yourself up for not overspending. The great thing is that paying yourself first is easy to do and will only take you a few minutes. The rich do it, so it has to work, right?

Avoid lifestyle creep. This is a fancy way of saying not to spend more as you earn more. Many of us get into the habit of getting a raise and then spending that raise on something. Most times it is something with a monthly payment, like a car, a higher cell phone plan, more cable channels, etc. Avoid doing this like the plague. When you get a raise, save it and keep living like you were before.

Be more frugal. Try to find ways to save money everywhere. This post talks about a ton of ways to save money from food to clothes to home repair. The more you can save by following these tips, the more money you will have for a rainy day or to invest.

Stop trying to keep up. This is along the lines of lifestyle creep, but I wanted to talk about it separately. We have a tendency to try to keep up appearances with our neighbors, friends and family. We need things to impress them, so we buy a bigger car, a bigger house, etc. I agree that for some people, this might impress them but only for a short time. You want to really impress someone? Retire when you are 50. That will impress them. They will not be able to stop talking about you and asking you questions about how you did it.

Final Thoughts

At the end of the day, your financial success hinges on one thing: living within your means. Learn to cut expenses here and there and avoid lifestyle creep. Also pay yourself first. In time, you will see that you are ahead of the game financially and will be well on your way to financial success.