Every day, I get to study the most intimate details of my client’s financial life. I know how much my clients spend on food, electricity, rent, entertainment, transportation – the list goes on and on. So, it should come as no surprise to anyone that I think about finances – a lot.

One of the most common themes in my clients’ situations is that none of them have any “disposable income.” Disposable income refers to money left over at the end of the month after expenses are deducted from income. What’s interesting is that the person earning $120,000 per year has $0 in disposable income – just like the person earning $30k.

In order to increase disposable income, you must either spend less or earn more. This brings me to an adage my dad says: “It’s easier to save a dollar than to earn it.”

Looking back at my childhood, I don’t think I ever appreciated my parents for being so frugal. They literally watched every dollar spent. My mom always knew which stores had the best price on meat, seafood, produce and everything else we consumed. She bought the cheapest toilet paper, used 1/2 cup of detergent when doing laundry, re-used zip lock bags (even paper towels), the list goes on and on.

My parents weren’t cheap. Even though my parents didn’t earn a lot, I had a very rich childhood filled with activities including piano, swimming, and after school programs. Knowing what I know about their finances and how expensive “life” is, I’m amazed that they were able to get so much on so little.

The point is not that you have to forego every life luxury. It’s just about being aware of where your dollar goes and evaluating every dollar spent. So, next time you spend your hard earned dollar, ask yourself “do I really need this or is the dollar better off in my pocket?”

Photo credit: GeoShore

Tagged as: being frugal, money management, smart finances