Controlling spending

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Most people try to get out of debt by making more money. The problem with this approach is that the average person has very little control over how much they make. When people try to pay off debt by asking their boss for a raise, they are starting at the wrong end of the problem.

Being in debt keeps you from taking risks. People are financially rewarded for risks. As long as you are unable to take risks, you will have very little control over the amount of money you make.

So if you want more money, you first need to get out of debt. It doesn't work the other way. You cannot just make more money to get out of debt. Even if you did, it is likely that your spending would just expand to use the new income.

To get out of debt, you have to learn to control your spending. This is not easy, it takes a tremendous amount of discipline--much more than the average person has. Anyone can control their spending, but most people will not actually go to the trouble to reduce the amount they spend.

When you take a long hard look at your personal finances, it is likely you can find 10% or more of your spending isn't really necessary. The first thing you need to do is track your spending. Money that you can't account for is most likely to be going for things you don't really need.

By eliminating unnecessary expenses, you should be able to at least put yourself in a position where your expenses don't outpace your income. This won't get you out of debt by itself, but it is a good first step. The next thing you need to do is lower your expenses even more by changing your lifestyle.

See the Money Saving Tips for ideas on how to reduce your spending.