Living Below Your Means vs Financial stability

Review what you need to do to get out of debt, learn how to save money, and start living below your means today.

Each of us, to a greater or lesser extent, is a victim of marketing and smart advertising. Have you noticed how often you spend money on things that you don’t even need? Surely you want a better car than you can afford? New big house? Designer clothes, new phone?

Unfortunately, many people do not even know how to live within ther means, that is, spend less or exactly the amount you earn, because this means that you will have to deny yourself something. Credit cards and loans allow us to buy even more things than our income affords. Thus, this lifestyle is unstable and wrong, since debt, like a snowball, absorbs you more and more, and you can no longer get out of this financial trap. So, learning to live below your means will help you avoid financial problems and learn to better control yourself and your spending.

Do not think that by limiting your spending, you will be forced to live in an old house and drive a bad car. While many people think that without credit cards and loan debt they will have to walk around with an old phone or bag forever, this is certainly not true. You can improve your financial situation by drawing up a financial plan, planning a budget, and so on. So what do you need to do to live below your means?

Step 1. Study the signs indicating that you live above your means

Surely now you are in doubt and are looking for excuses to prove to yourself that you do not live above your means. However, after studying the main points, you can understand whether this is so or not, and if you really exceed your financial limits, you can understand how to fix it.

  • You have a loan or credit card debt

Of course, people who know how to manage their finances, as a rule, do not have debts. Of course, there are emergencies when we need a little cash, but this is the exception, not the rule. You probably know that loan or credit card debt is expensive. You may not be aware of this, but you are overpaying huge amounts of interest. In some cases, the amount of interest even exceeds the amount of your loan! If this happens to you, try to get out of debt and pay off as quickly as possible to avoid additional interest.

  • You don’t save at least 10-20% of your income

People who have mastered financial literacy know that you cannot live from paycheck to paycheck, because you always need to have some savings. The best way to start raising money is to save at least 10% of your income. Perhaps now that you are already making ends meet with your debts, it seems to you that this is impossible, but by paying off your creditors you can start saving money. If you are making $ 3,000 a month, save at least $ 300. So by the end of the year you will have about $ 3,500. Now imagine that in 10 years you will have $ 36,000 in savings (which you could have paid as interest on loans).

  • You don’t have an emergency fund

An emergency fund is the amount that the person should have in case of an emergency. For example, if you lose your job and cannot find a new one for some period of time, you need funds to pay rent and feed your family. Thus, your account should have so much money that you can exist without work for about 6 months. It is best to set up automatic payments and deduct money regularly from each paycheck.

  • You buy things you don’t really need

Do you know the situation, when a new iPhone comes out, you run to the store to buy it and show off to your friends? Maybe you buy expensive bags that cost like a whole salary? Are you going on vacation to a five-star hotel that you can’t afford? Do you visit restaurants with a huge average check?

If at least one of the above is about you, you definitely exceed your budget and soon you will not know how to make ends meet. Believe me, a new purchase dazzles only the first time, and then you get used to new gadgets or bags, and the debt remains with you for a long time. The best thing you can expect yourself to do is ask the question “Do I really need this? Do I need this as much as a safe and bright future? ” Trust me, in most cases, the answer is no.

Step 2. Understand why it is important to live below your means

It may sound strange or even silly at first, but living beyond your means can give you financial freedom. If you continue to live in debt, it means that you do not love or respect yourself, as lenders force you to pay high interest rates that will only make your life more difficult. As you know, freedom is a voluntary discipline.

Avoiding debt and paying interest rates will give you the opportunity to save that money in case of emergencies, college for your kids, buying a new car, and so on. It is also worth knowing that due to the pandemic, about 4 million Americans have lost their jobs and some of them got into debt. Of course, it was easier to overcome this difficult life situation for those people who have savings and an emergency fund. It is also important to understand that if you live above your means, do not have savings and any financial stability, continuing to count the days until paycheck, it makes you stressed and worsens the climate of your family.

So, paying off debts and savings will help you not only have confidence in the future, but also teach you peace of mind that you do not owe anything to creditors and you do not need to pay a huge amount in interest. After a while, you will be able to see all the benefits of saving and living this way, so it’s worth starting now.

Step 3. Learn how to live below your means

You shouldn’t think that it will be easy and will immediately lead you to the desired result, but if you follow financial advice and have patience, you will soon see how your life will change. So where do you start?

  • Know how much you make

In order to start living the life you want, you first need to understand how much you earn. Thus, study all your sources of income and analyze the amount you really have. In addition to the main income, many people have part-time jobs, online shops, renting out houses or apartments. Make sure to factor in everything you get each month.

  • Create a financial plan

Once you know the amount you are earning, you can create a budget to help you manage your funds. Also, a solid financial plan will help you deal with debt and achieve your financial goals. Typically, the plan includes monthly expenses, debt repayment, an emergency fund, savings, investments, and more.

First of all, you must determine your monthly expenses, such as housing bills, utility bills, Internet and mobile phone bills, food, and more. Understand how much you are spending each month on basic needs and try not to exceed that amount. The next step is to deal with other expenses, such as emergency funds, savings, etc. Don’t forget to leave some money for things like clothing, car repairs, and more. If you want more information, read the articles on drawing up a financial plan or contact a financier who will help you not only develop a plan but also manage your money.

  • Increase your income

As a rule, our needs grow with age, but our income does not. Of course, in order for it to be the other way around, you need to work a lot on yourself. Take some courses or read relevant literature to offer more services at work. Thus, you can get a promotion or find a more profitable place of work and earn more money.

Don’t neglect part-time jobs. Sometimes it takes a lot of effort to get out of debt, and extra work is one of them. Of course, it’s always easier to take out another loan, but the extra work will teach you to value the money you make, rather than borrowing from the lender.

  • Spend less than you earn

You will not find a single millionaire in the world who spent his entire salary when he first started to succeed. Spending less than earning is the golden rule. If your salary is just enough to make ends meet, then you need to think about changing jobs or learning a new skill. Life from paycheck to paycheck is not life, but survival.

  • Stop relying on loans and credit cards

Many people think that they have no financial problems at all, because they can always take out a new loan or pay for a purchase with a credit card. What they don’t know, however, is that this is a smart and well-thought-out debt hole that gets deeper every time you borrow.

Use loans only in case of emergency, when you have no choice and loved ones cannot help you to get the amount you need. Borrow the minimum amount that is sufficient to cover an emergency and pay it as soon as you possibly can. A new bag is not an emergency. As much as you want hit, forget about it until you can afford it.

Bottom line

Financial literacy isn’t easy, but you will thank yourself later if you master this skill. Feeling financial freedom and independence, you will relieve your life of stress and get a lot of new experiences that will help you build a stable and comfortable life. If you start now, you will soon be able to get out of debt, start saving money, and live the life you deserve. Remember, nothing important comes easy, but it’s worth it.