While this advice may seem commonsense, personal debt levels are at an all time high. It seems the message isn't being heard. 

Some people are spending far more than they earn and it is no wonder that bankruptcies are now just a way of life. In days gone by people who couldn't pay their debts were sold into slavery. This was a significant deterrent that no longer exists today.

But life is about having fun isn’t it? You know, enjoy now and worry about it later? People who think this way usually lack the fundamental skill of being able to delay gratification. Do you have the ability to say “no” to something you badly want, knowing that you will have a greater reward later? 

Take a look at your last credit card statement. How much of the stuff did you really need? What do you have to show for it now? Be aware that much of the advertising you see is designed to make you feel that you need something that five minutes ago you never knew existed. 

The second secret to massive personal wealth is to control your expenditure. 

You must guard against spending more that you can comfortably afford. Remember, you can spend 90% of your annual salary and still comfortably retire in most cases.

It is also important to protect your savings from yourself. Once you put money away you mustn’t fund your lifestyle with it. This will be difficult because you will be able to afford holidays, cars and even a bigger house. All the things that are so tempting.

I have developed a system for helping you control your spending. I call it my WEALTH© system. Here’s how it works:

Every time that you are thinking about spending money, ask yourself whether it is a WEALTH© decision? 

WEALTH© is an acronym for Wise, Economical, Accountable, Liable, Thorough, Honest.

Wise: Is this purchase a wise purchase? What would happen if you didn't buy it? Can you purchase it at a different time or place and save money? Can you trial it and return it if you're not satisfied? What guarantees does it come with?

Economic: Is this purchase an economic purchase? Is it worth the money? Does it have a substitute that is cheaper? Have you shopped around to ensure that the price today is a good price? Does it have a high perceived value but a low actual value? Are you paying excessively for brand names?

Accountable: Make it a rule that you record all your spending (particularly when paying cash). You will be amazed what you spend your money on. If you don’t want to do this ask yourself why? What is it that you don’t like about it? Always ask for a receipt and keep it. A good tax accountant will find ways for you to legally claim a lot of expenses, but you will need to have kept receipts. Finally, it is essential that you reconcile your credit card statements. All you need to do is tick off all the items on your statement against your receipts. Query all those items that don’t have receipts. A lot of credit card fraud goes undetected because people don’t check their statements carefully. Send me an e-mail if you would like further information about how to reconcile your accounts (click here).

Liable: Are you accepting liability for the payment? A lot of people use charge cards thinking that it isn’t their money? Or they say I can always pay for it later! Dangerous thinking! Credit cards allow people instant gratification but this comes at a cost. You will need to repay the money at some point and you will incur high penalty interest if you use the credit facility. Charge card debt often spirals out of control until you feel defeated because the minimum repayments barely (if at all) pay the interest. Do you know how much you owe right now? The other problem with debt is that the thing you buy is often consumed immediately or loses value so quickly that by the time you have to pay for it you don?t feel like you’ve got value for money. Because we all like to consume and it’s so easy to rack up debt many people just use the card and worry about the consequences later. Being liable means that you accept responsibility for making the payments and you have checked that you can afford it before buying.

Thorough: Being thorough means that you have done your research before buying the product. You know all the features and shortcomings of what your buying. You have compared the performance of your purchase with its nearest competitor and are happy that any premium you will pay is worth it. If you are buying a house or car and getting a loan, being thorough means that you have calculated the amount of interest you are going to pay and looked at ways of reducing it. It means that you have considered all contingencies like what happens if I lose my job? You have organized insurance before using it and have determined the amount you will receive if you have to claim on insurance (agreed vs. market value, new for old etc.).

Honest: Are you being honest with yourself? Have you ignored any of the above, even knowing that doing so is dangerous? If you know that you can’t really afford it then don’t fool yourself. Either find another way or delay the purchase until you can afford it.

Don't ever pay debt with debt. Don't pay your credit card or other debt repayments with another credit card or facility. This is the sign of someone who is sinking fast.

If all else fails and you have been honest - you have nothing to fear. If not, your deception will come back to haunt you when you least expect it. 

If you can follow my WEALTH© system then you will quickly control your spending. Once you do this you will most likely find enough money to start saving, or even better you may be able to save more! 

Action Steps For Immediate Results

Take my "30 Day Test" to get back control over your spending.

The rules of the test are:

• Only pay cash for things you buy. Get the feel of money draining through your hands every time you spend it.
• Write down everything that you spend your money on. Keep a small paper notebook and write in it everything that you spend your money on. See how much it hurts to pay big items like rent. Try to account for 100% of your cash outlay by recording absolutely everything.
• Add up your spending and look at the results, they will fall into the following categories:
  1. I have more money than I usually do.
     This is probably because you had to write everything down. You became more conscious of your spending habits. Try to maintain the momentum.
     
     
  2. I couldn't commit to writing everything down.
     It can be hard to have the discipline to write everything down. Don't feel like a failure; you can master this skill. Start over again and make it a game.
     
     
  3. I have less money than before.
     This isn't good. Look back over your spending habits. Were there any unexpected large items that blew your budget? How can you better plan so that these situations have less impact in the future?
     Go back and reread the WEALTH ? habits. Try to put them into action.