Ask a person what is the single most important thing that could happen to improve his or her financial picture and the answer you'll get the answer—in various gradations—a sudden influx of cash. Some of us wish for pay raises, others want to win the lottery, and more indecisive types just dream of a sudden windfall of cash.



Take an average family in an average neighborhood in a small town that's earning, all together, about $60,000. Chances are that family is wishing for more money. They probably even have an amount in mind. If only, they will whine, we could earn $70,000, we'd have it made! Even $68,500 would be enough! That would be all it would take for us to be well off.

Meanwhile right down the road is another family in the same general circumstances, and they're also moaning about not having enough money. The thing is, this second family already earns $70,000. But it's not enough. They need $80,000, maybe even $85,000.

Whatever you earn, if you're strapped for cash right now, chances are pretty good that some people in very similar circumstances are doing just fine with the same amount (or less than) you're earning.

And whatever sum you're dreaming about ... wake up! There's somebody out there that fell into that much money and is now flirting with bankruptcy.

It's just as easy (maybe even easier) to go broke earning $100,000 a month as it is to go broke earning $4,000 a month.

If you're a typical American you probably wonder: how on earth can you go bankrupt if you bring in $100,000 a month? That's over a million a year!! How can you be anything but rich?

It is not hard to go broke. Here's how. Spend $101,000 a month. Believe me, that extra $1,000 can really sneak in unnoticed when the income shoots up. That's why so many lottery winners and movie stars and the "silly rich" end up bankrupt. When you only bring in $4,000 a month, it's pretty hard to "make a mistake" and spend $5,000 since you're probably counting your pennies.

Your financial health is made up of two things. Americans fixate on one and ignore the other.

Part of your overall financial picture is your income. That's true. I don't want to underestimate it. Your income is vitally important. And don't get me wrong—more is better when it comes to income.

But the other part of your overall financial picture is what you spend. This is where many of us go wrong.

We act like we have control over our income because we fixate on income. The truth is, you don't have much control over your income.

Let's say you have a job. You really don't have much control of what kind of raise you'll get. You can do a good job, but if the industry suffers a downturn or your boss doesn't like you or you make some career mistakes, you may not even get any raise. You may have heard that hard work will bring you rewards but that saying does not guarantee that working hard for a corporation is going to guarantee you large and regular raises. You may not get them.

You might think you could just find another job. That's true. But the kind of job you can get depends a lot on your education, skill set, and background as well as where you live and the competition to nab those elusively rare high-paying jobs.

And, here's the hard truth, at some point, you're going to peak. Even if you're a world-famous brain surgeon working at a world-famous brain surgery hospital, you may be already at the top of your game. You can't walk out and figure you'll work somewhere else, because there may not be a "somewhere else" for you.

On a smaller scale that is where many of us find ourselves. We earn decent pay and it is unlikely we are going to be able to do much better somewhere else (if there even is a "somewhere else").

But you do have a lot of control over what you spend.

Some people are mystified by that. They see debts and expenditures as things that "just happen."

It's true that you have to pay rent, buy food, and pay your taxes, but you have some control over the first two items. There are lots of areas where you have tremendous control, for instance, spending on entertainment, clothing, jewelry, and vacations!

However, many people struggling with debt act like discretionary spending cannot be controlled.

A family in five-figure debt took an expensive vacation one year and ended up getting dunned by collection agencies because they let some of their already festering debt fall into worse arrears than previously. When I asked them why they went on an expensive vacation that year, they seemed stunned.

"It was summer. We always go on vacation."

I recently overheard a woman discussing which hotel she was going to stay at during her upcoming vacation. Then she ran into her landlord. She was two months late with her rent! Somehow, she never made the connection between spending on a vacation and being late with her rent.

Expenditures relating to discretionary things (vacation, entertainment, amusement, eating out, travel, clothing, jewelry, costmetics, and so on) is controllable.

Most people can trim a budget by 10% easily, without feeling a pinch. Most of us can save even more by making conscious decisions and adjustments. And it's possible for zealots to cut expenses radically without giving up a decent lifestyle.

If you cut your expenses by 20% (a good target, by the way), that's like getting a 20% raise. You can't reasonably expect your company to give you a 20% raise, but you can give one to yourself!

What's more, frugality is not necessarily a program of hideous deprivation and austerity. It can be creative, engaging, and fun. It forces you to do things differently, and that can give you some pretty amazing insights.

Here's what I mean. You start to feel your life spiraling out of control, and you figure, if only you had more income, it would just "fix things." But then you decide to start saving money. You give up cable TV and going to the movies. Now this is going to force you to interact more with your family and friends. You start playing ball in the park after work or board games at night.

Take the example of the eat-out-seven-nights-a-week family who discovered that eating at home gave them a chance to hone their cooking skills, let them spend quality time together, eat better ... and even have fun. The couple loses weight, finds a hobby they both can enjoy, and learns (here's a surprise) that it's really no more time consuming to cook regularly than to eat out.

Money-saving strategies may encourage you to take up sewing, start a garden, or bake your own bread ... and many people are amazed to find they enjoy these things.

Not only that, frugality is a good incentive to proper work-life balance. Most of us get into the debt whirlwind because we're living too much in the work zone. (Work is expensive! It requires gas, clothing, day care, and all sorts of special services to permit us to log those long hours.) Frugality is going to force you to spend more time at the home front.

And when it saves you money, you realize you not only can afford to spend more time at home with the family, you can't afford not to.