"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."
--Charles Dickens, in "David Copperfield"
The only way to be financially successful is to live below your means. If you only make $20,000 a year, spending $25,000 just isn't going to work as a long-term strategy. A lot of people are living exactly at their means, spending as much money as comes in. This won't work either, since nothing is left over to invest for long-term growth. The only way to live a financially successful life is to spend less than you earn, and invest the remainder for long-term growth. For a lot of people, a few steps need to be taken to initially get the right balance of income and expenses. These steps come in two categories: increasing your income, or decreasing your expenses. There isn't any other way; it's kind of like managing your weight: there are way too many fads, when all that matters is calories in (food intake), and calories out (exercise). For most of us, we don't have direct control over our incomes (though you may have more than you think), so decreasing expenses is usually the way to go. Just about all of us have our "problem" spending areas, and ways we could free up a lot more cash. Sometimes we're not aware of them, which is when an unbiased assistant can come in handy. Call an understanding friend (or accountant, if you have no friends) and review your finances with them, for instance. Another excellent way to start is by expense tracking. For one month, write down everything you spend money on, and add it all up, dividing it into categories like "car", "housing", "clothing", etc. That will give you a pretty good idea of where your money's going. The most important first step to take is to make that initial review of your finances, and get a snapshot of where you are, and compare that with an idea of where you'd like to be financially. Financial software, like Quicken, Money, Moneydance, or about a dozen others (some of them free), are pretty handy in this area.