Ways & How

How to Live Within Your Means

How to Live Within Your Means

Having access to virtual money, such as with credit cards, can make someone feel a false sense of wealth. The credit limit on the credit card is not extra money; it’s a short-term loan that you will need to repay sooner or later. You might get to a point when you realize that you are depending on your credit cards for essentials like food. You should remember that people who lived beyond their means by getting mortgages they couldn’t afford was one of the biggest causes of the recession.  Learning how to live within your means is an important step to being financially responsible.

  1. Keep track of your income and expenses

    The first step to living within your means is to know exactly what “your means” is. List your take-home income in one column and your expenses in another column. Subtract the expenses from your income. If the result is negative, then you are living beyond your means. If the result is a positive number, this does not mean that you can stop reading and continue being complacent with your financial situation.

    ould be that the amount you listed for your credit card payment is the minimum payment you have to make for the month. In that case, you will still be paying for the shoes you charged to your card years after they fall apart. The resulting amount does not include money set aside for emergencies and for the future.

    Being aware of your income and expenses is hopefully a big enough reality check for you to cut down on the extraneous stuff you are spending your money on. The list will help you separate wants from needs and what’s good to have versus what you need to have.

  2. Don’t keep up with the Joneses

    Aside from being aware of your income versus expenses, the most effective advice for living within your means is to have the mindset that you don’t have to compete with other people. A lot of people who have had to file for bankruptcy have gotten themselves there because they borrowed money to get a house, yacht, or fancy car that they couldn’t afford just because their friends had one too. Another example of living beyond your means is getting the latest model of a gadget when what you have is still in good working order. Often, this is due to influences from the media and the people you’re with who make you feel that you should keep up with the latest thing. When you see yourself being pressured by your so-called friends to buy that handbag despite being unable to pay your debts, separate yourself from them and surround yourself with people who are frugal or financially responsible.

  3. Pay in cash

    Having a credit card is convenient, but it requires a discipline that some people may not have. For those who are struggling with debt, paying in cash is a good way to live within your means. Unlike virtual forms of money, using cash forces you to literally handle your money, so you are acutely aware when you give it away in exchange for something. You will think twice before parting with your hard-earned money to make sure you are paying for something essential. You can control the cash in your wallet to limit the amount you spend.

Learning how to live within your means does not mean you’ll forego everything except the bare essentials of living. It will feel like a starvation diet; you’ll be bound to give up and binge after a while. While you are not encouraged to indulge in excess, do not deprive yourself either. Reward yourself with a delicious meal or vacation from time to time, and you will realize that living within your means enables you to have peace of mind, which is priceless.


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