If you’re like most people, living within your means is difficult. At times, working hard and maintaining a high quality of life without going into debt can seem almost impossible!
Unfortunately, most Americans carry some level of consumer debt. According to Experian, the average outstanding balance on credit cards is over $5,200. If that wasn’t bad enough, inflation and a higher cost of living are likely going to cause this figure to go up, too!
On top of that, being ridden with debt puts additional pressure on you. Not only are you forced to earn more money just to pay bills, but you lack financial freedom, too. As a borrower, you become your lender’s servant and must repay your debts with interest!
To get out and stay out of debt, you should be living within your means at the least. This way, you’ll have the resources available to pay it off and improve your overall financial position!
For one reason or another, it’s far too common for Americans to spend money they don’t have. Rather than living within their means, they’re living above them. As a result, they wind up in debt, are unable to save, and can’t progress towards their financial goals, either!
However, when you’re living within your means, you have better control over your spending. You’re able to balance today’s needs and wants while also looking ahead to your financial future!
To be living within your means, your income needs to be greater than your monthly expenses. This way, you’ll have enough money to cover your bills and then some!
The amount that’s left over after all your bills are paid is your savings. With it, you can pay down debt, start an emergency fund, and build a solid financial foundation!
When starting, aim to save at least 20% of your income. This will give you plenty of fun money for today and it will also jumpstart the process of building wealth. Depending on your long-term goals, you may need to have a higher savings ratio if you plan on becoming independently wealthy!
Oftentimes, the transition from living beyond your means to living within them is difficult. Most people find that it’s not easy to reduce their spending or be more frugal with money.
However, adjusting and living within your means can be life-changing. Not only does it help you to save money each month, but it allows you to have a complete financial transformation, too!
Here are 5 easy ways you can start living within your means and saving money!
Too often, budgeting gets a bad rap so people don’t do it. Rather than having a plan for their money, they spend it at will which causes them to go overboard!
However, when you make a budget you’re creating a spending plan for your money. You’re establishing the places where you want it to go as well as the amounts. This helps you afford the goods and experiences that excite you while also adding to your overall quality of life!
Even though a budget focuses on spending, its main goal is to provide you with savings. Once you’re setting money aside, you won’t just be living within your means, you’ll become more financially secure, too!
With a budget, you have a plan for living within your means. Now, all you have to do is stick to it!
For most people, staying on budget is the hardest part of saving money. It’s difficult to control spending when you’re faced with retailers marketing gimmicks and the constant temptation to buy impulse goods!
However, sticking to your budget gets easier once you start tracking your spending. In doing so, you become a more conscious consumer. You’re more aware of the amount that’s been set aside for each budget category, your current spending in it, and the amount you have left. This way, if your spending is getting out of control, you can curb it while there’s still time!
One of the easiest ways to keep track of your spending is by signing up for Personal Capital. In a matter of minutes, your accounts can get connected, giving you access to your spending history. As long as you check it on occasion, you’ll see where you stand and can make adjustments to ensure that you’re living within your means!
When it comes to money management, most people tend to concentrate on their spending first. They determine where they need and want to spend which causes them to get carried away and be unable to save!
Rather than focusing on spending, prioritize your savings by paying yourself first. Each time you’re paid, use part of the check to improve your net worth. [link] This was, the most challenging part of living within your means gets done upfront!
Depending on your goals, you may also want to divide your savings up. Part of it could go towards your child’s college education expenses, a cash runway, and building your nest egg. Either way, as long as you’re paying yourself first, then you’ll be living within your means and improving your situation!
Also, financial automation can make paying yourself first even easier. Once it’s set up, you’ll put money aside without ever having to remember to do it!
After budgeting, many people realize that their spending habits prevent them from saving adequately. As a result, you may need to cut or eliminate excessive spending to reach your monthly savings goals!
Too often, people trim their happy expenses first. They cut spending on the things that provide them with joy which causes them to feel deprived!
To make living within your means sustainable, you have to spend on the things that make you happy. Rather than shedding the expenses you care about most, get rid of the ones that matter least or feel like a complete waste of money. This way, you won’t feel like anything is missing, and saving money won’t be as hard!
Also, understanding the difference between your needs and wants can help you spend less money. Your needs are the basic living expenses that are required for your survival whereas your wants are the types of expenses that make you feel more comfortable. Having said that, there’s more wiggle room in the places where you want to spend money rather than the places you have to!
In addition, it can be helpful to look at your fixed and variable expenses, too. Fixed expenses have little to no price flexibility and typically can only get negotiated towards the end of your contract. But variable expenses are more within your circle of control. You get to choose the amount, frequency, and whether you’re going to spend on them at all!
When it comes to living within your means, there’s a certain amount of money you have to make to cover your basic living costs. When your income falls below this amount, then you won’t be earning enough to survive!
If your spending is at the bare minimum and you’re still unable to save, then earning more income is the only way you’re going to make ends meet, let alone save!
A few ways to increase your income are:
As your income grows, it’s also important to keep lifestyle creep in check. Otherwise, you’re spending may balloon to the point where you’re unable to save, again!
Living below your means helps you save and improves your financial well-being, but it doesn’t stop there. It’s also beneficial to your mental and emotional health. When you have extra money at the end of each month, you’ll feel less stress and be more at peace!
At times, living within your means isn’t going to be easy. Despite the challenge, it’s necessary. After all, saving money is key to unlocking the life of your dreams!
Is living within your means a constant struggle? Contact me, I’d be honored to help!
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