Living within your means enables you to contribute to your financial goals while providing a cushion in case of an emergency. This is possible only when you’re earning more money than you’re spending.
While sticking to a budget can be difficult at times, as long as you plan and make an effort, your financial house will always be in order. These simple steps will help you manage your money effectively and help you spend less than you earn.
1. Track Your Expenses
How much money do you earn each month? How much is spent on necessary living expenses? Living within your means starts with knowing these numbers.
A spending plan is the best way to ensure you’re spending less than you earn. Once you start keeping tabs on your expenses, you’ll have a much clearer picture of where your money is going each month.
2. Separate Wants and Needs
The best way to live within your means is to answer questions honestly and make firm decisions on what you want and what you need.
When you know the difference between a want and a need, you are less likely to overspend and more likely to avoid debt. Before making a purchase, think it through or find a less expensive substitute.
3. Don’t Try to Keep up With the Joneses
Avoid the temptation of wanting the same material things as everyone else. Living within your means is impossible if you try to maintain an image you can never live up to.
Don’t measure yourself by what others have or try to compete with them either. Instead, find contentment in your lifestyle.
4. Build an Emergency Fund
Don’t let unexpected events completely ruin your finances. If you set up emergency funds, you will avoid borrowing and piling up debt whenever you experience a financial emergency.
Life can be unpredictable, build your emergency fund to cover up to 3-6 months of your expenses, to avoid financial pitfalls.
Living within your means helps you practice the discipline needed to have healthy finances. It’s often easier said than done but with adequate planning and discipline, you can enjoy the peace that comes with financial freedom.
Being financially responsible is important for your financial health. Learn to manage and enjoy what you have now so you can easily keep striving for the life you want. Invest in a future you deserve when you invest with OVERWOOD today.
“There is no dignity quite so impressive, and no independence quite so important, as living within your means.” -Sophia Amoruso