Why Would You Want To Live Below Your Means?
Living below your means will allow you to save money towards a great financial goal. You could save on the short term for a business you would like to start so you could make more money than working for someone else. You could save it to give your children a better shot at life than you had by providing them with a college education. Or you could save the money and plan for retirement, especially if you wish to retire early.
Benefits of living below your means:
- Less stress by not living paycheck to paycheck.
- Guarantee that you have enough money for retirement and even retire early.
- Start a new business or new career.
- Pay for college for yourself or your children.
- Buy a summer home.
- Allow your family to have a stay at home parent.
- Get an addition built on your home.
- Travel around the world.
- Allow yourself the opportunity to have time with your grandchildren.
I know what some of you may be thinking, especially if you are in the lower middle class or even more poor - "I barely make enough to cover my needs, how can I cut back even further?"
Often we tend to overlook some expense that can be cut back or eliminated that can rob us of what we would want out of saving money. Simple things like turning off lights when not in use could save a person $600-$1500 in a 10 year period. That may sound like small change, but if you do not use the money you would have paid to the electric company on something else, those funds can be placed in a higher form of investment vehicle which could create 10 times the initial value in 30-40 years. And that is just by one small change in a bad habit.
Making a budget is often the best way to see where your money is going each month and to keep more of what you have. Before you do the budget, try an experiment for one month. Every time you buy something, charge something, or write a check, keep a daily log of how much your spent and what you bought. Have each member of the family do the same. At the end of the month, figure out what your expenses were and see if there are any things on that list that can be reduced or eliminated.
Often people overlook many of their daily bad habits when creating a budget and tend not to include them, then later wonder why it was hard to stay within the budget. That month long experiment will help you identify items that may not have shown up on your budget list.
What does Living Below Your Means Really Mean?
Do you have to deprive yourself and your family? No just think before your spend. I'm not suggesting you live on the street and dive in trash can for your dinner. You need to make a conscious effort to monitor spending and make cuts where possible.
By spending less money than you earn, you have more money at the end of each month that can be saved toward a worthy purpose. If your earn $200.00 a week and spend $210.00 you are only accumulating debt. If you spend $190.00 out of your $200, you can have an extra $40 each month to save. This means $480/year or $4800 in ten years and with interests could be over $8000. If you overspend by $10/week your debt will be well over the $4800 when you tack on the interest rate from the credit used in supporting your overindulgence.
As a young person, 10 years may seem forever, but the older you get the faster those 10 years will go by and you will only wish you had thought of doing it 10 years ago.
Just remember, as Benjamin Franklin once said, "A penny saved is a penny earned."
Tips for Living Below Your Means
- Don't drink alcohol
- Don't smoke
- Eat at home more often
- Pack a lunch
- Avoid vending machines
- Cut down or eliminate junk food
- Cut down or eliminate fast food
- Pay off the highest amounts on your credit cards each month you can afford
- Negotiate with your credit card company for a better rate
- Save for holiday expenses instead of using credit
- Save for vacation expenses instead of using credit
- Do not use your credit cards to pay for living expenses (rent, utilities, paying other cards...)
- Do not use your credit cards unless it is an emergency
- Turn off any electric appliance not in use
- Check your faucet and fix any drips
- Check your plumbing and fix any leaks
- Find any drafts in your home and seal the source
- Get a library card and borrow books instead of buying them
- Rent movies at the library which is free
- Carpool
- Save up money for a used car instead of signing a loan on a new or used car
- Only do grocery shopping on a full stomach
- Try to leave the kids at home when grocery shopping
- Shop around for the best deal before you buy anything
- At the grocery store, compare the price by ounce to determine the best value
- Buy store brands instead of brand name products
- Coupons are only great on items you normally use - shopping around is better
- When contacting friends and relatives living out of town, use e-mail or send them a letter instead of a phone call
- Call local gas stations to find out who has the best price before you fill your tank
- Don't use the ATM unless it is an emergency
- Buy clothing and gift items at the end of the season and use them for the next year
- If you are going to the movies, bring in your own snacks if they allow it or eat before you go
Place A Value On Yourself First
Some people will make an absolute effort to tithe to their churches without fail. They would rather go without some things in their lives in order to meet their religious dedication. Why not do this for yourself?
Pay yourself first! When you cash that check or put it in direct deposit to your bank, put 10% net of your check into a savings account or other form of investment and do not touch that money until you reach your goal.
Get a big coffee can and at the end of the day, put any loose change you have into the can. When the can is full, put that into your savings account.
As the money comes in from each paycheck, after you have paid yourself, pay your bills according to your budget plan. Set aside for emergencies and another savings for a splurge to get it out of your system.
Just remember, when making cuts and eliminating things from your life, not to be so extreme that you no longer enjoy the challenge. Try doing small things at first until you can learn to adjust to less and as you get used to it, add more things to your list to cut.
Learn to manage and control your spending habits by making those tough choices of eliminating instant gratification from your vocabulary. When you make the end goal so appealing that those little items no longer seem as important as the goal, saving becomes easier.
