RULE 40

Spend less than you earn

I’m amazed how many people flout this simple but most golden of all golden rules. You have to live within your means. Control your spending. Allow yourself to create a little bit of savings, with which to generate more income. (Remember the rabbit farm? You can’t breed more rabbits if you sell them all.)

This Rule doesn’t contradict Rule 35 about small economies not making you rich, by the way. You should live within your means but live well enough to be happy. If you don’t earn enough to have champagne every week, then have it only once a month. But do have it if it makes you happy.

This is about being informed and in control. You need to know what your income is and what your outgoings are. We’ll talk later about how to curb spending and make savings and how to cut up your credit cards if they’ve let you down – they do that sometimes, evil little things.

You also need to know:

• any expenditure that is likely to come up
• any provision you’ve made for contingency plans
• any future income you may be entitled to in the way of interest or investments coming to fruition.

And that really is about it. Where people go wrong is not whether they earn enough or spend too much – both of those are fairly easy to overcome. No, the biggest mistake is not knowing what you are doing, where you are financially and what is up ahead.

I know it can be tough to live within your means but if you are constantly in debt, all the prosperity that is rightfully yours is going to some faceless bank. I bet they’re enjoying spending it. I bet they’re having champagne more than once a week. Why encourage them?

I want you to know to the very week, the very hour, what you earn. And I want you to monitor what you spend, what it costs you to live – where you waste money, where you save money and where you spend money wisely. As long as more is coming in than is going out, you’re getting the basics right. If more is going out than coming in, you need to take swift and effective action to redress the situation.