Earn More And Spend Less Is Your Ticket To Financial Freedom
The second step in Moolanomy’s Financial Success Plan is one of the early steps to help you build a strong financial foundation. This step is meant to improve your cash flow, as such, its key components include starting a budget, reducing your expenses, and making more money. Improving your cash flow is simple. All you have to do is follow this one rule: More In Less Out (MILO).
The Universal Law of Wealth
What is More In Less Out (MILO)? It simply means that you have to spend less than you earn, or make more than you spend. Let’s expand on this a little bit by showing you three types of cash flow situations:
That’s simple right? To build wealth, you can’t spend more than you make (accumulating debt), or even spend as much as you make (living paycheck to paycheck) — you have to make more than you spend!
Three Steps To Improve Your Cash Flow Today
With that realization, your first priority is to focus on improving you cash flow. To do so, there are three basic steps that you can follow:
1. Start A Budget
Starting a budget is all about tracking performance and building accountability. As I mention in the previous step, things tend to get better when you monitor them. The main goal of budgeting is about tracking your expenses and income to make sure you have more of the latter. This makes budgeting a perfect fit for cash flow improvement.
To start budgeting today, I suggest that you read How To Create A Budget. It has all the steps and resources you need to get you started.
2. Reduce Your Expenses
Cutting your expenses is one of the quickest ways to shape up your finance. You can use budgeting tools like YNAB, BudgetPulse, or Quicken Online to track your expenses. Once you better understand your spending pattern, you can apply techniques discussed in the Frugalist Expense Reduction Guide to methodically reduce your expenses.
For more ideas, you can also consult the List of 1,001 Money Saving Tips and Ideas.
3. Make More Money
Unfortunately, you can only reduce your expense so much, as such it’s also important for you to look for ways to increase your income. To help you get started, I’ve written Extra Income Guide: How To Earn More Money, a comprehensive guide to help you make more money and increase your income.
For more ideas, you can also consult the 40+ Alternative Income Ideas and Resources.
Cash Flow Is The Key To Success
As I said before, this is simple but not easy. It will take a lot of time and effort on your part to go through these steps to improve your cash flow. The important thing is to get started and do what you can now to spend less and earn more. Once you have this going, move on to the next step and start paying down your debt as part of your expense reduction strategy.
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living paycheck to paycheck, paycheck to paycheck, cash flow improvement, how to create a budget, ExpensesRecommended articles
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Hey, you really pin out the achieve financial freedom and retire wealthy.
I would like to add another step to increase the cash flow – pay down the debt!
In order to maximize the potential of our income to generate wealth, we must reduce our debts as they are the enemies who take money out of our pocket.
@Harrison – Thank you. I agree about paying down debt — that’s the next step!
People tend to think finance is really complicated, but you just demonstrated that it can be very straight forward. I will say that your list of ways to earn more money helped me tremendously!
YNAB and Quicken Online are great tools. I prefer Mint, to be honest. But however you choose to track expenses, as long as you are doing it… it is a good thing.
And Dawn is absolutely correct, PF is not as hard as people make it out to be. Simple math!
Full Disclosure: I am Marketing Director at http://www.budgetpulse.com another option for users who would like to try a personal budgeting software, only we are manual input of data. I can discuss more if anyone is interested in hearing about our upcoming release of our revamped site in June.
I am currently trying to try to make some side money on a personal endeavor. It is difficult but it seems these days that relying on one income is too risky and can only get you so far. You can nit pick all the savings you want but that can only get you so far, may even be a big hassle.
Craig Kessler
Marketing Director at BudgetPulse
craig@budgetpulse.com
@Craig – Thank you for the disclosure. I will have to look more closely at BudgetPulse.
I agree! I got out of debt by cutting expenses and sticking to a budget – but ALSO by earning extra money. I started selling handcrafted pendants (made from recycled Scrabble game tiles) on line and at craft shows. It has been going great a has made a definite impact on my family’s finances.
Excellent post. It seems so simple but the fact is that it really is. All you need to do is take notice (budget) and act.
So true! I have enjoyed reading Ramit’s blog, I Will Teach You To Be Rich. By combining his automating system with your emphasis on alternative income while managing expenses, I will have a winning package deal!
I found that step 2 (reducing expenses) was much easier than I expected, once I had made a budget and actually got a close look at what I was spending on. One easy way for many people to spend less is to reduce eating out. I was pretty amazed to actually see how much I had been spending that way. Another thing that helps is spend more time on recreation that costs very little (I took up hiking).