A good friend of mine, James Gough, is in the fitness space. And he talks about energy balance. Imagine a line, and this is your baseline, if you consume more energy or calories than you expend, (i.e eat more and move less) we all know what happens, you put on weight and vice versa if you want to lose weight, you move more and eat less. Simple.
This also relates to money, but in reverse, if you spend more than you earn, guess what, you’re in debt. If you spend less than you earn, you’re saving money.
And in both scenarios this also has a compounding effect. If you consistently eat more and don’t exercise enough you become overweight, then obese and so on so forth, we all know the risks with that.
It's the same for money, and I talk about the compounding effect of your investments a lot. (see my last article "would you spend £336,000 on coffee for a more in depth look here) But it also relates to the actual money you put away, or spend.
My dads favourite saying; "if you spend £1 less than what you earn, you’ll always have money, if you spend #1 more than what you earn you’ll always be in debt". And what you do on a daily, weekly, monthly basis determines where on this line you will sit, and this is why it’s super important to keep a track on what you’re spending, aka budgeting, and then putting away what you don’t spend.
But again, as I say time and time again, do it the other way around - save first, spend last.
The day after pay day have 2 standing orders: one going to savings for your short term stuff, one going to investments for longer term.
Thanks for reading,
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