It may be easy to say the words. But living below your means isn’t a walk in the park. It takes a calculative and disciplined mind to pull through. The pressure of living beyond your means is always high. But living below your means isn’t all about reducing your expenditure to save money. It means being able to control your finances and not the other way round. You think money can’t control you? It can, and when it happens, it’s one of the worst feelings.
People controlled by their finances always walk a tight financial rope. Any unexpected budgets can cripple their pockets. For instance, they may not be able to pay for car repair, medical bills, and at the same time live their normal. Living below your means gives you the power to do such things without straining. If you have been struggling financially and yet you earn something, maybe this is the only magic you need. The main rule to remember is that you should live on less than 85% of your income. So, if you earn $200 a month, use $170 and save the rest.
Why should you live below your means?
Living below your means is one sure way to achieve financial freedom. You are able to cut expenses and increase savings. And the higher the savings, the more freedom you have. You are able to fund unexpected expenses or events without straining. Events like job loss can be so devastating for people living above their means.
So, if you find yourself not saving after paying for everything, you are still living above your needs. Debts are another sign that you are not living below your means. They can be loans from all types of creditors such as banks, financial groups, or credit cards. The good news is that there are ways to catapult you to live below your means. Some of these methods may appear hard when you start, but the end result is fulfilling. If you want to achieve financial freedom, it’s about time you adopt these measures. As time goes by and you own them, debts and financial deprivation will become a thing of the past.
Tips on how to live below your means
1. Create a budget
Budgeting for your income is the first thing you should do in your journey to living below your means. It will help you evaluate your expenses and income, then establish whether you live above your means or not. Assign every dollar to a specific job. There are several budgeting principles and systems that can help you do this. The 50/30/20 rule is one of them. It requires that you spent 50% on your needs, 30% on wants, then 20% on savings and debt repayment. Other popular methods of budgeting include spreadsheets, apps, and cash envelopes. The catch here is to use the method that serves you best.
Something to note about budgeting - always budget before you get the cash. It helps you to avoid impulse buying or the impression that you have more money. Such thoughts or impressions are an enemy of living below your means.
2. Track your expenditure
Drafting the budget isn’t enough. You should ensure you are faithful to it. Keeping track of your expenses prevents you from falling off the lane. Thanks to technology, there are several methods you can use to track your daily expenses. You can use a spreadsheet or one of the many mobile budgeting apps. If you have a partner, involve them in this process. Have a shared platform to monitor your expenses.
Record everything you buy and its cost. This will help you get a general overview of your budget progress. If using mobile apps, some will alert you when you’re about to surpass the budgeted amount. Keep reviewing and editing your expenses for the period you budgeted for and keep improving with every budget.
3. Avoid credit cards like a plague
Credit cards are a great saving tool when you don’t have upfront cash for whatever you want. Studies show that 65% of Americans have a credit card. Americans love credit cards. However, no matter how good the deal appears, credit card debts is a rabbit hole you should avoid. You end up paying high interest and encourages you to live above your money as you always “have money.” This will lead to a vicious cycle of debts.
If things are so bad that you must have a credit card, use it wisely. Don’t stretch your purchases to the limit. According to Financial advisors, you should use only 30% of your credit card cap. Surpassing this limit can affect your credit score.
Also, consider negotiating with your credit card issuer. You can request lower interest rates or a discount. Never be afraid, no creditor wants to lose a client. So, use this chance to explore all the available means to get a deal. Sometimes, even threatening to jump-ship can scare them to oblige.
4. Live frugally
Frugal living means being conscious of your expenses and spending only on the things that matter. A frugal person lives below their means and their expenditure is always justifiable. Therefore, living below your means cutting off unnecessary purchases. Instead of going for flashy and expensive things, always look for alternatives. Differentiate and plan your needs and wants. This way, you’ll cut a lot of buying that would otherwise eat into your budget.
5. Downsize your home
If you are buying a home, don’t go for the most expensive house you can afford. It's prudent to consider a cheaper alternative. If you go for the most expensive house that the bank says you can afford, you’ll struggle. Remember you are not only paying for the house. There are other spheres of life that must go on. You’ll still pay school fees, insurance, and mortgages. Trying to pump all your income towards a single project is a form of financial suicide.
6. Live off one income
If you have more than one source of income, don’t budget for all of it. Let the other incomes be used in other things. You can dedicate them to saving, paying a life insurance cover, and other benefits. Learning to live by a single paycheck allows you to have incredible financial freedom. The other incomes can be used as a backup in case of unexpected events and bills.
Final thoughts
Yes! It's doable. Living below your means is an exciting feat to achieve. With the right mindset and budgeting, you can grow your bank account faster than you think. Participating in financial challenges and attending forums can also help you towards your goal. If you follow the techniques above, you’ll note the difference. Next time you check your account balances things will be better.
Disclaimer: This is not legal advice. I am not a legal and /or financial advisor or investment advisor. This is a blog post about helping you to manage your money. All information found here, including any ideas, opinions, expressed or implied herein, are for informational, entertainment, or educational purposes only and should not be construed as personal or legal advice or investment advice. While the information provided is believed to be accurate, it may include errors and inaccuracies. To the maximum extent permitted by law, Fixyourbrokenfinance disclaims any and all liability in the event any information, commentary, analysis, opinions, advice, and/or recommendations prove to be inaccurate, incomplete or unreliable or result in any investment or other losses. You should consult with an attorney or other professional to determine what may be best for your individual needs. Your use of the information on the website or materials linked from the website is at your own risk.