Spend much less than you earn.  It may sound simple, but this idea is the basis for financial security.  Master this concept and all secondary goals, such as paying off debt or saving for a large purchase, will fall into place with ease.

The first step to achieving this goal is to understand take-home income.  Consider what is deposited into your bank account each month, and not your gross salary.  If you are participating in an employer-sponsored retirement plan, such as a 401(k), your take-home income is what you net out after that deduction.    A tip for those who are paid bi-weekly:  assume your monthly income is only two paychecks.  When those lucky two months come around when you are paid three times, consider these paychecks a windfall to help you catch up with other goals.

The second step is to understand your spending.  If you use your debit card for most purchases your monthly bank statements will be a great place to start.  Print out a few months of statements from your online account and review where you are spending.  Don’t forget the credit cards! Print the corresponding months’ statements and take a good look at where your money is going.  If you use cash for most of your purchases, it’s time to start a spending journal.  Resolve to write down every single expense for 30 days.  A great trick is to collect a receipt from every purchase all day long – gather those receipts at night to record in a journal on online for easy tracking.

The third and final step is to compare the income with the expenses.  If you are spending less than you earn every month there should be a surplus that you can now assign to other goals.  If you see a theoretical surplus on paper, but not in your actual wallet, review your expenses again.  Are you overlooking anything?

If your expenses exceed income it’s time to start cutting.  It should be easy to start – identify the expenses you can live without.  Can you lose that subscription?  Pare down your cell phone plane.  Drop the premiere cable channels (or cable all together).  Bring your lunch to work, and cook more at home. Just remember, every little bit counts.

You’ve cut everything you can bear and are still spending more than you earn – what now?  The reality of this situation is you must increase your income.  Can you get a part time job on weekends?  Or consider selling some of your “stuff” online.  This might also signal time to move to a less expensive home or city.

Take a good look at what you’re earning and what you’re spending. When you do, you’ll set yourself up for financial success.  Good luck!

How do we take inventory of our financial lives? Are you 100% satisfied with your money situation? If not, what’s keeping you from having that satisfaction?

Suppose you are happy. Could you be languishing in a safe zone missing opportunities to earn, save, or give more?

I think we’ve got three basic stages in our financial lives. Managing, growing, and giving. Which stage are you living and how do you plan to move forward?

Stage 1- Managing Your Money

Ideally we should learn the basics of managing money as children or young adults. The sad reality: Most of us learn ‘on the job’. And we screw up, sometimes hugely. In the management stage we need to develop the habits and knowledge that will allow us to create a basic level of financial security. Unfortunately, past mistakes can keep us on a financial hamster wheel if we aren’t careful. Using credit, understanding taxes, budgeting, paying debt, and having an emergency fund are milestones we need to reach before we can hope to effectively move on to growing our money.

Stage 2- Growing Your Money

You’re a master at managing your money. Now what? Time to tackle investing and taking some risks so your money can grow. This can be intimidating. Remember you want to grow your money, not lose it. If you’re clueless don’t be afraid to admit it. It’s easier than ever to broaden your financial horizons through online resources. Get over your fear of talking to a financial planner and clearly define your long-term goals.

Stage 3- Giving Your Money

Americans have a hard time with the concept of enough. We want more. I like that about us. There’s nothing wrong with wanting to amass a huge fortune. But aren’t we all here to make the world better in some way? When you have more than enough it’s thrilling to consider how surplus can be used to enrich the lives of others. Be an angel investor for a company that will create jobs. Give your grandchildren a secure financial future. Create your own organization to focus on the causes you care about. The opportunities to give are limitless and the rewards are priceless.

No matter which stage you’re living remember the point is to learn, grow, and move on.