Canadian Personal Finance For Dummies excerpt: How to manage money and stop overspending

1. People who spend more than they earn (accumulating debt)
2. People who spend all they get (keeping nothing – hacking)
3. People who appreciate 2%, 5%, 10% or 20% or more (incremental savings)

We’ve seen $50,000 earners save 20% of their income ($10,000), $100,000 earners save 5% ($5,000), and people making six figures a year who save nothing or add to debt.

Let’s say you currently earn $50,000 a year and spend it all. You may be wondering, “How can I save money?” Good question! Rather than taking on a second job, you might try living below your means—in other words, spend less than you earn. Imagine that for every disgruntled person who earns and spends $50,000 a year, someone else is out there making $45,000.

Too many people live on less than you do. If you spend the way they spend, you can save and invest the difference. In this chapter, we examine why people overspend and help you look at your spending habits. If you know where your money is going, you can find ways to spend less and save more so that one day, you, too, can live richly and achieve your goals.

Now, it’s entirely possible that in part because of the relatively high cost of living where you currently live, you may feel that you don’t have much power to lower your expenses, if any. That may be true, but this may make you think about moving or taking a job in a more affordable location. In a tough economy or if you’re working (or transitioning) into a high-demand job, you may have more options than you realize.

Checking for overspending

If you’re like most people, you have to live within your means to achieve your financial goals. Doing so requires that you always spend less than you earn and invest your savings wisely (unless you plan to win the lottery or receive a large inheritance). To put yourself in a position to start saving, take a close look at how you spend money.

Most people earn enough money to survive. And some can’t even do that; they simply spend more than they do. The result of those spending habits is, in fact, the accumulation of debt.

Most of the influences in society encourage you to spend money. Consider this: Most of the time, you are called a the consumer in the media and hallowed halls of government. It is not referred to as a person, citizen, or person. This section looks at some of the enemies you face as you try to control your spending.

Getting credit

As you probably know, spending money is easy. Thanks to ATMs, credit cards, dozens of smartphone apps, PayPal, Venmo and more, your money is always there for you to use,​​​​​​24/7.