If there has been one change in my personality since leaving education for the first time in 16 years, it has to be my perspective on living within my means. Scraping by has been my standard for many years now.
I was happy if I could pay rent, my bills, buy some food and have some fun with my friends. I lived in a dive, I ate baked beans and it was great.
But all things must pass, and living just within my means doesn’t have the same appeal any more. In the long run, the difference between living within and living below my means may just be the difference between financial freedom and financial jail.
The advice that you should live off last year’s income, not next year’s, has to be some of the soundest wisdom I have ever heard. It’s another way of expressing that living below your means is the key to financial security.
Why? Because living within your means makes no allowance for emergencies or long-term goals. Surviving month to month may seem fine when you’re in your early twenties, but what happens when you need to pull together some money for a hospitalisation or you unexpectedly get retrenched and finding work becomes difficult?
Learning how to live below your means at a young age will set you up for life. So how can it be done?
Save money first
Great advice I have heard is that people who live below their means fund frivolities only one their savings accounts are funded. Hence, if there’s a little less money this month, frivolities are the things to go, not savings.
Track your spending (with, for example, a financial journal) so as to understand what you’re losing money on. Eliminating unnecessary expenses (smoking, excessive consumption of alcohol, buying lunch every working day) may be the difference between living within or living below your means.
Try it for one week: eliminate all unnecessary expenses, and put the money into a savings account instead. Extend the challenge to a month. Once you see the money piling up, you’ll be much less likely to return to your unnecessary expenditures.
Think it through
So much of what we spend is spent because we haven’t thought our purchases through. Have you ever tallied up how much more you spend when you buy brand items instead of store items? Sure, it’s only a dollar per can of tomatoes but add that up across the year, and you have some major savings that can be made with no effort. Plan your finances, so you don’t end up losing money on ATM fees or having to pay late fees on your credit cards.
Habits can be chosen, worked upon, changed. If going to the local Westfield is your current form of entertainment, change the habit. If you’re likely to spend tonnes of money on a night out, why not do a DVD swap with your friends and have some movie nights at home? Learning new habits may be the key to living below your means.
If keeping up with the Joneses is the reason you’re only just living within your means, it’s time to re-evaluate what you’re looking for in the long-term. Living below your means can mean a wonderful retirement or taking the trip you’ve always dreamt of. Keeping up with the Joneses can’t give you the most important thing- some peace of mind.
Do you manage to live below your means?
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