What is Living Below Your Means?
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What is living below your means? Living below your means is simply having less expenses than your earnings, but that’s easier said than done. How do we do that? In this post, we’ll be talking about how you can live below your means, what it means, and why you should do it.
Now, let’s get started. Let’s talk more about living below your means so that you can fully understand the concept.Staying under your means does not prevent you from spending money on things you like.
Instead, suppose you want to create a more secure financial future, while still enjoy an annual holiday. In that case, you should make financial options, such as saving extra money, making budget, and cutting unnecessary shopping to help make that dream facilitated without going into debt.
It may not be easy to consider lifestyle adjustment that you need to stay down from your means. Car debts, school loans, mortgage or rent, and credit card debt continues to loom over us.
The good news is that there are methods to help you meet your goals. Here are six guidelines for living below your means to get you started.
1. Make a Budget
The budget is one of the most important steps to get out of the cycle of living salary in the budget. Not paying attention to your expenses can lead to a disastrous debt cycle. You will be spending without knowing how much you can or should.
Calculate your income and expenses to make a budget. This can help you determine whether you are living under or above your means.
Consider not just your income but also additional sources of revenue when calculating your monthly income. Child support, gifts, tax returns, or money from side jobs or a second career are all examples of this.
Then figure out how much money you spend each month. This covers all loan payments, credit card payments, insurance payments, rent/mortgage payments, food, utilities, and other monthly costs. Because each month may be different, average your monthly costs across six to twelve months.
It’s time to decide if you’re living below your means or going above and beyond. Subtract your monthly costs from monthly income. If any money is left over, this is great news! You’re living within your financial means. However, if you got a negative figure, you could be living above your means and need to make some changes to reach financial stability.
2. Track Your Expenses
After successfully creating a budget, it is time to monitor your expenses. Create a spreadsheet or use one of the many budget applications available for mobile devices to monitor your expenses.
Keeping track of every transaction is an excellent technique to urge yourself to think carefully before making a purchase. Knowing your budget will help you decide what expenses you actually want to make.
Tracking your expenses will also allow you to make more informed decisions. What if you really like golfing with your friends 2 Saturdays every month? Well then knowing the cost of those trips will allow you to cut back somewhere else in your budget.
Maybe you don’t eat out on those weeks so that you can fully enjoy yourself on golf day. Living below your means doesn’t have to mean getting rid of everything you love, but it will ask you to prioritize what things in your life mean more to you, so that you spend on only those experiences.
3. Reduce Extravagant Spending
Do you consider yourself an extravagant spender? Research has shown that the majority of Americans spend extravagantly. The Bureau of Labor Statistics discovered in his 2017 expenditure that Americans spend more than 80% of their annual income. In 2017, the average pre-tax income was $ 73,573, while the average annual expenditure was $ 60,060.
Fortunately, if you want to stay below your means, you can reduce your expenses in some of these areas. When you are keeping an eye on your purchase, ask yourself, “Do I really need it?” Asking yourself this question before every purchase, you can help you understand your priorities better and where you want to spend your money.
By staying under your means, you can help you stay out of debt, pay loans and save you for large expenses. Depending on your interests, there are many areas here where you can cut unnecessary expenses:
- Subscriptions: Cancel pricey gym memberships if you’re not using it. Most of us have multiple entertainment memberships including Netflix, Hulu, Disney+, etc, but be honest. Do you use all of them? Cancel the ones you don’t watch often.
- Your Car: When it’s time, look at your car. Why purchase a new vehicle when it might lose up to 20% of its value in a year? You can still reach your destination in a used car.
- Food Expenditures: Lastly, keep a look over your food expenditures. Instead of going out to eat for lunch and dinner, pack a lunch and cook at home. If the experience is one you truly value, then maybe have one night a week where you eat out at your favorite restaurant.
4. Engulf Yourself in a Side Hustle
If you really want to live below your means, obtaining a second source of income may help you get there.If you regularly do 9-5 jobs, taking a second innings can be difficult without overwork yourself.
Fortunately, the gig economy is getting rich, and there are countless opportunities to make money from your hobbies and interests. Do you own a reliable car and like driving? Uber, Lyft, and other ridersing services in your area can look for new drivers.
Or have you always wanted to be a barista? Your leisurely Sunday mornings may be turned into a profitable activity by serving clients at your neighborhood coffee shop. Plenty of freelancing companies on the market will allow you to put your skills to work. The opportunities you get with these can be limitless.
5. Downsize Your Residence
One may get emotional overhearing the thought of leaving their home. However, buying the costliest property that the bank thinks you can makes it challenging to keep up with insurance, mortgage, and maintenance payments.
The typical American worker’s pay currently has the same buying power as it had 40 years ago, but house prices have risen by a whopping 47% in the previous six years alone, while incomes have increased by just 16%.
Because of the current income-to-housing-price ratio, moving to a smaller property may be a better financial alternative. While having a guest dining room sounds lovely if it’s only utilized once or twice a year, then it may make more sense to sell your property and relocate to a more inexpensive home or community.
In the end, a home is not caused by the number of rooms but by the people living inside it.
6. Save From The Beginning
Transfer money to your savings accounts or emergency fund before you are tempted to spend all of your salary. Most banks and jobs allow for automated transfers, so when you are paid every week or two, your salary may be automatically sent to separate accounts, allowing you to avoid overspending.
Switching to stay under your means cannot be as easily as you expect. However, if you are committed to the creation of a more secure financial future, it is a way to get less than what you earn.
This may seem challenging at first, especially when it comes to eat every night or purchase the latest digital products. However, with these six guidelines, you will be able to get out of debt, pay your bills on time, and start saving for your dream home or even a tropical holiday.
