Live Within Your MeansMay 18, 2022
Are you tired of being in debt? Are you sick of living paycheck to paycheck? If so, you need to start living within your means. It may seem like a difficult task, but it is pretty doable. This blog post will discuss tips to help you live within your means and gain more financial freedom.
Are you lacking money or overspending?
Does money often seem to be in short supply to you? Do you feel that you don't earn enough and that life is too hard for finances? It might be a good idea to look at your life and compare your spending habits with how much you earn. For example, you might be spending more money than your earnings. If so, you may want to adjust your expenses if you want a better financial future. Living within your means plays a significant part in achieving this.
Living within your means is a way to attain financial freedom. It means spending less than how much you earn from your income sources, such as your job or business. It may sound easy to do, but it is challenging to pull off for many people.
- When people get salary increases or gain a promotion, their way of living may also increase. Before, you only spent a certain amount of money on expenses. You also grow your expenditures because you now have a higher salary. So the result is that nothing hardly changes because your costs also increase along with your paycheck.
- People don't know how much their exact overall income is for a year or month. Pair it up with the fact that they may also not keep tabs on how much are their living expenses and where their money goes.
- People are living a lifestyle that is beyond what their income can handle.
- The absence of financial goals can make people spend their money willy-nilly since there is no reason why one should save money in the first place.
- Lack of discipline and self-control
If one wants to save money and gain greater financial freedom, living within your means is an excellent way to start. There are various ways how one can apply this to their life.
1. Identify your income and expenses
Before you start planning anything, it's essential to determine how much you are earning per month and year. You can easily distinguish it from your payslips and other documents that prove your payout. Afterward, calculate how much you spend in different monthly categories, such as food, transportation, bills, luxuries, debt payments, housing, etc. Finally, note these things down somewhere to have a reference once you decide to do a budget.
2. Make budgeting a habit
What's the point of identifying the exact amount of your income and expenses? So you can create an adequate budget. Budgeting involves considering the figures you have specified before and making adjustments to create more breathing room with your finances and meet whatever goals you decide to do. The goal is to have money left after deducting all your expenses monthly. The leftover amount saves money that can be used as an emergency fund or for making investments later.
If, after doing budgeting, you get left with nothing or end up with a negative total in your calculations, then it's a different story. It would be best to adjust your lifestyle when spending money.
3. Don't keep up with the Joneses
One of the significant reasons people blow their budget is that they are trying to live a luxurious lifestyle beyond what their salaries can sustain. The desire to compete and be more significant than your neighbor causes one to spend money on material things that may not be necessary and only gain status and recognition. Social media and the Internet provide an easy way to look at what others possess, leading to feelings of inadequacy and envy when you see something you don't have. When such feelings creep into your mind, ask yourself if you need to buy something because you may only gain short-term satisfaction and happiness but have more significant problems down the line, such as debt.
4. Think hard before making a big purchase
Big purchases require lots of money or a long-term payment that can accrue interest over time. Examples of these are cars, houses, or costly gadgets. So before leaping, think twice before making such purchases. First, see if there is an urgent need to acquire such an expensive thing. Assess your income situation and figure out if your job is stable enough to handle making payments should you decide to make a long-term payment. You may think you can make such a big purchase right now because you are earning a good amount of money, but you never know what may happen several years later in your career. Having a secondary source of income and a good amount of saving as a backup helps, along with having people you can ask for financial support in case things go south. Also, one may try saving money to gather the amount of money needed to make large purchases instead of relying on credit cards or getting enticed by a low down payment offer.
5. Pay your debts
Debts have an insidious effect of piling up interests that can significantly impact your budget as they creep into your expenses. One may think it's okay to leave paying your debts for a while, especially for those that don't have an urgent deadline. However, loans can accumulate and eventually dent your budget if you don't settle them quickly. Instead, try saving a set amount of money monthly for paying debts and clear the principal amounts as much as you can instead of paying only the minimum amount required or interests, such as in credit card payments. The sooner you can clear debts, the faster you can be more financially independent.
6. Go for cash as much as you can
If you can pay for something using money, use that option instead of using credit. Using cash for payments creates a limiting effect that you can only buy depending on how much money you have. Credit cards create temptation, making you think you have considerable spending power when borrowing money to pay for your purchase. The effort required to earn a chunk of money can make you think twice before buying something.
7. Take advantage of sales, discounts, and special offers
You can gain a more significant amount of savings when you buy things during sales or when they have discounted offers. They happen at regular intervals, and it would be wise to time your buying during these offers. An excellent example of taking advantage of these things is buying gadgets like cellphones or computers. These things tend to upgrade yearly, and as a result, previous models can get a significant price reduction. Unless there is a need to buy the latest model, you can wait to purchase gadgets until they are cheaper. The same thing can also apply to other items.
The road to financial freedom is within your hands.
Living within your means can be challenging, especially if one lives in a country whose financial state is not as good as others or there aren't many opportunities around. However, it is one way one can achieve a better financial life by adjusting expenses based on how much you earn. If, in the end, one is still unable to achieve economic prosperity by applying the tips we mentioned, then it may be time to find additional sources of income to help cover expenses and make ends meet. Of course, a little increase in expenses won't hurt when your income goes up as long as everything is still taken care of and you are not left in the red. What's important is that your income can support your lifestyle without spending too much and leaving you with nothing.