All the top financial gurus are always talking about how people should live within their means. To many people, this sounds like a huge hassle where they have to give up all the things they enjoy in life. That isn’t entirely true. While you may have to make some sacrifices, living within your means can be an answer to your money problems.
Defining the Concept
Living within your means is the idea of buying only what you can comfortably afford without going into debt. The main idea behind this concept is to get rid of debt and to be able to pay cash for all your purchases while also saving money for your future. It is an idea that is grounded in financial independence. Not being dependent on credit cards, loans or other forms of debt, allows you to have more control over your money and reduce all the money wasted on fees, interest, and penalties.
Putting It to Work in Your Life
To begin living within your means, you have to start with a budget. You need to know what money you have coming in and what money you have going out. An important part of your budget will be defining where your money is going. In addition, it will involve identifying debt and creating a plan to pay it off. It can take some time to get to the point where you are truly living within your means, but in the meantime, you can begin to shape your plan.
You want to start with your current debts. In order to really live within your means, you have to get rid of the debt. You may have some major debts, like a mortgage, student loans or auto loans. You should create a plan that allows you to pay these off as quickly as possible without accumulating more debt. This just means not using credit cards or other loans to pay these things off.
Part of your debt repayment plans will involve trying to free up more money in your budget. You should make a detailed list of how you spend your money. Don’t skip anything, even the little things like that fast food lunch or coffee purchase you make each day. Also, look at ways to cut expenses. For example, you may find it is cheaper to go with a local insurance agency than one of the national guys. Comparison shop and find cheaper alternatives to current expenses.
After you have freed up money, you can begin to assign that money to debt repayment. After your debts are paid off, you can begin using the money you were paying on your debts to go into savings. Having a savings enables you to fall back on it for emergency expenses or large purchases instead of accumulating debt.
Most people make an adequate amount of money to support their needs and wants. However, they get so wrapped up in debt that their finances become strained. Once you begin to live within your means, you will find that money issues don’t really come up as often. You probably won’t even miss the things you cut from your budget, and may even have freed up enough money to enjoy them again once in a while.