One of the keys to financial well-being is to learn how to live below your means. While many realize this, there is a fear that you will end up feeling deprived and have to do without. But, that is not true. You can spend less than you make without feeling as if you are making sacrifices.
Many Americans struggle to live from paycheck to paycheck. That means trying to spend less than you make quite a challenge. You need to develop a plan and find ways to live below your means.
WHAT IS LIVING BELOW YOUR MEANS?
Living beneath your means is when you spend less than you make. It’s that simple. Of course, the challenge lies in how to do this when you struggle to pay your bills.
Better money management gives you the financial buffer you may need when the unexpected happens. There will be times when you have multiple burdens strike at once. Having financial stability helps you navigate those muddy waters when they find their way to your front door.
WHY YOU NEED TO LIVE BENEATH YOUR MEANS
Before you can learn how to live this way, you need to “Know Your Why.” Why is it that you want to do this? Is it out of necessity or do is it due to financial goals. Here are some reasons why you should live this way, that might resonate with you.
1. Teaching your children
Kids learn by example. When they see Mom and Dad being wise with money, they pick up on that. In fact, my kids all know about how we use cash and not plastic at the store. They are learning to watch prices and see that we always shop with a budget in mind.
They also know that we save money out of each paycheck. While our kids do know actual figures, they understand the importance of saving money.
Read More: The Money Lessons We Must Teach our Children
2. Reach your goals
Perhaps you want to go on a dream vacation. Maybe you want to get a newer car. Whatever your dream, you can use the money you save towards reaching them.
One of our goals was to take our children to Disney World – without racking up debt. Through our hard work, we were able to make that dream a reality. Now, we have new goals such as a backyard deck remodel and another fun family vacation. Knowing the goals that we want to achieve helps us save the money we need to make them a reality.
Read More: How to Set and Reach Your Financial Goals
3. Being content with what you have
Learning that more is just more and does not lead to happiness is a lesson all of us need to follow. Knowing that you can be happy with what you have allows you to feel content and happy.
Read More: Determining Your Wants vs. Your Needs
4. To give generously
I am a believer in the prophecy that you reap what you sew. That is true with the way we give unto others. We can help those in need and find that when we do, we are rewarded ten-fold through other blessings.
There is no better feeling in the world than financial security. When you lie your head down on your pillow at night, the last thing you are concerned about is how you are going to pay your bills.
6. To build your emergency fund
If you don’t have one yet, you need one. What happens when the air conditioner decides to stop running? Or, how will you pay the deductible for your vehicle when you get rear-ended at the stop light?
These are reasons why you need an emergency fund. You must have money available to cover those expenses, without worry that you will end up further in debt as a result.
7. To save for your future
It is essential to get started on both your own retirement savings account and also your children’s college funds. Those events will be here before you realize it.
Smart planning now will set your family up for success when these milestones happen.
8. Reduces stress
Without financial burdens weighing you down, you instantly reduce the stress in your life. If something comes up, there are funds available to cover your expenses. No lying awake at night wondering how you will have to put food on the table.
HOW TO LIVE BELOW YOUR MEANS
You know the reasons why you, but putting your plan into action may be an entirely different struggle. There are simple tips to implement that will help you achieve your financial goals.
1. Know how you spend
Before you can make changes, you need to better picture of your current finances. A simple way to do this is to track your spending for at least 30 days. Make a note of every little thing you buy – even that $5 coffee in the morning.
An easy way to do this is by completing a spending worksheet. Take a look at your credit card and bank statements over the past 30 days to see where your money goes. Include every. Single. Transaction.
Once you see where your money is going, you can then start making changes to not only how you spend, but where you spend.
2. Create a budget
You need to give every penny a job. That is, create a budget and account for how you will spend every cent you make. Create a workable budget with the amounts you plan to spend and then include the amounts spent (from your spending plan). Make sure yours consists of all of the necessary budget categories, so you don’t leave anything out.
A quick glance will show you that you may plan on spending just $100 a month dining out, but the reality is that is closer to $150. Now it is time to make some changes.
3. Reduce your spending
In theory, it sounds simple. And, you may be thinking if I could spend less, I already would. The fact is that sometimes, you can lower some of your monthly bills.
Take a look at subscriptions you pay for and no longer use and cancel those services. Reach out to your cable company and change your plan or ask for a rate decrease. Services such as BillCutterz do this for you, so you can focus on other things and still save money.
4. Make more money
If your budget is as tight as it can get and you need to have more financial security, it may be time to add more money to your budget. You can try taking surveys from home to make money or get more creative and become an Uber driver or tutor students.
Don’t let your current financial picture deter you from achieving your dreams. A few simple changes are all it takes to put you on the right path.