Most of us have heard at one point or another that it is important to “live within your means.” But what does that mean exactly? There are a few steps you can take to make sure that you are indeed living within your means.
- First, create a budget to make sure you are not spending more money than you are making each month (i.e., not accumulating debt each month).
- If you are accumulating debt each month, you need to look at your expenses and see what you can cut. It is important to carefully examine each of your expenses and decide if it is a need or a want. For the expenses that are wants, ask yourself what are you gaining from spending your money on it? What if you didn’t buy it? Would it make that big of an impact on your overall happiness? If not, stop spending money on it.
- Keep detailed records of how much money you are spending and if you are really sticking to your budget. You may be surprised how much you spend in one area or another. Then find ways to trim those expenses instead of cutting them out completely.
- Set savings goals for the items that you want but can’t afford at the moment (i.e., a big trip or car purchase). Be sure to track your progress towards your goal and have a timeline to make sure you are on track.
It is easy to get caught up in the moment and stray from your budget or make that big purchase without having the funds but it creates more debt and stress than it is worth. By living within your means, you are able to have the essentials and some “wants” without the stress of accumulating debt.
-Kathryn M.
Sage Personal Finance 