Spend less than you earn and save the difference. Thanks, Captain Obvious, we already knew that.  The problem isn’t that we don’t know this, the problem is that the majority of us are absolutely horrible at it.

Let’s take a look at the one thing we are really good at – Spending. Lot’s and lot’s of spending and that equals lot’s and lot’s of debt and consumption. 

In Canada’s case, household debt is around 170 per cent of disposable income. In other words, the average Canadian owes about $1.70 for every dollar of income he or she earns per year, after taxes.

That ratio is a Canadian record, and up from about 100 per cent 20 years ago. Holy shit! 

We know that we are really great spenders but how do we change into really great savers. Warning: the formula is simple:

Income – Cosumption = Savings

What if I said you could increase your monthly S by 790% with a few tweaks to your C. You might be thinking – That’s great but I have no I left after C and C is just too damn fun, I just can’t do it.

I’m here to tell you to forgetaboutit and show you through some shockingly simple math that you can do it. 

Example 1Savings Rate increases 790% by reducing excess by 10%.

Income – Cosumption = Savings

Problem: I ($4,000) – C ($3,950) = S ($50) – After mortgage, car payments, and other expense – You barely have $50 left over. If this sounds familiar you are failing your future self.

Soloution: Decrease C by 10% by eliminating some of your excess expenses over the month. If you are looking for ideas start with getting rid of the booze and maryjane. Next reduce your crazy cell phone bill to something reasonable, cancel cable subscriptions, cut the Starbucks and app store purchases, eat less take out, and, and, and, and your new calculation might look like this:

I ($4,000) – C ($3,555) = S ($445) = You just increased your monthly savings by 790% by reducing consumption by 10%.

You could increase your monthly S rate by 790% or more with some simple tweaks to your habits of C. Your future self will thank you and there will be plenty of high fives. 

So unless you win the lottery, inherit a bunch of cash or happen to marry someone with money (all advisable strategies by the way) you are going to have to get rich the old fashioned way by spending less than you earn and saving and investing the difference.

That’s it Runners, the most obvious, common sense part of personal finance and at the same time the most important part. You can thank me later.

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