Living Within Your Means?

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Living within your means

Think about this: Your quality of life is proportional to the quality of your budget. Don’t believe me? Keep reading.

As a nation, we love to shop, but sometimes that consumerism leads to debt and monthly financial struggles.

One way to look at living within your means is measure if you have more month than money. Here are a few tips to make sure that doesn’t happen.

Track what’s going in and going out

The first thing you need to know is what goes in and what goes out. Also know as a balance sheet in business finances.

Jot down all income you have. This includes your job, side work, bonuses, pension, etc.

Side Bar: Don’t “hide” any extra money from your side job. You may have decided this strategy will provide some cushion to help in times of trouble. But, it’s much better to plan what you will do with it, rather than it set there without a purpose. More often than not, we will find a way to use that extra cash for something we don’t need. Be sure to ear-mark every last dollar. You will be giving each dollar a job to do.

Next, make a list of every bill you have, from rent to car payment. Don’t forget bills that may not arrive monthly.

These are your fixed expenses – the ones you have limited control over.

The difference between your income and fixed expenses is what’s left for the expenses you can control — your variable expenses.

Most of us have sufficient income to cover our fixed expenses. After all, we wouldn’t have taken on obligations we couldn’t pay. It’s the variable and discretionary expenses that so often get out of control.

Track your expenses

A budget… yes a budget, is the single best way to ensure you live within your means.

To keep tabs on your progress, or lack of, you’ll need to track your money as you spend it. These days apps make the process easy. If you want to live within your means and reach your goals, you have to track where your money’s going.

Separate wants and needs

When it comes to shopping, knowing the difference between a want and a need will help keep you from over spending. Before you make a purchase, ask yourself if you really need it. If you don’t, wait before you buy it. Take  a few days to decide.

Continued…

Keeping up with the Joneses

No idea who starting saying this, but it’s good insight. Sure, your friends or neighbors might drive nicer cars, have the newest technology, or take expensive vacations, but that doesn’t mean you have to.

It’s easy to think you need to go out each spring and buy an entire new closet of summer cloths. Some of you reading this just silently said.. “well yeah, what’s wrong with that?”. Be really honest with yourself… are you influenced by your guy friends or girlfriends who are doing the same? Most people don’t need to replenish their closet each season. On the other hand there are those that do need an upgrade.

Pay in cash

It isn’t always easy or immediately gratifying, but adopting a pay-in-cash lifestyle can save you from falling into a debt trap. If you can’t afford to buy something now, don’t pull out the plastic. Instead, save up and pay cash.

Keep an emergency fund

Life is unpredictable. We can all agree on that. Or maybe that’s just an excuse for not planning at all. You decide.

fortune teller

…planning is the lesson here.

Make it a goal to have 5 months of expenses saved up. Take all your fixed expenses and variable expenses and add them up. To put this into perspective, if all your expenses come to $1,800/month, an ideal emergency fund would have a balance of $9,000. When something goes wrong, and it will, you won’t have to reach for your credit card or take out a loan to pay for it.

Save money wherever possible

Saving money will help you stop overextending yourself financially. Try these tips to get started:

  • Never walk into the grocery store unprepared. Before you shop, clip or print out coupons, check the weekly circular, and make a list. I estimate I save about $40 a trip this way.
  • Skip designer coffee. Sure, it tastes fantastic, but it’s also $4.50 a cup. Make your coffee at home.

Cut down on expenses

If you’re still struggling to live within your means, take a hard look at your expenses. There is probably something you can cut out or at least cut down on. For example:

  • Gym memberships.
  • Hair and nail salons.
  • Cable TV.
  • Cellphone bills.
  • Shopping trips.

 Developing a healthy lifestyle

While this is the last tip, it’s the most important one.

When you hear terms like “living within your means,” especially when combined with words like “budget,” it’s natural to look over them. It’s easier to ignore the issue than to deal with it. As people we naturally move away from pain, and toward pleasure. Something to think about…

That said, it’s time to get our attitude right when it comes to budgeting. Having your finances out of wake is a continuously stressful lifestyle. So what’s more painful? Educating yourself on budgeting and exercising some disciplines? Or feeling that knot in your gut when rent is due?

Your call.

Stay thirsty,

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