One of the biggest challenges to successfully managing one’s finances usually involves an individual’s ability to live within their means. Truthfully, the enticements of modern living makes it easier for people to let their income, expenditure and lifestyle move out of alignment.
At its core, living within one’s means—making financial decisions based on what one can readily and comfortably sustain given his or her income—is what sound personal financial management is all about.
Here are a few tips on how one can go about living life well with the financial resource given to them.
Know your income & and expenses
One of the fundamental principles involved in an individual living within his or her means involves knowing what’s coming in and what’s going out.
In most instances it’s usually easy to know what comes in (salary, pension, side work etc), the harder part is managing what’s going out. As such, having some form of budget that allows for tracking income and expenditure is important.
Only when an i n d iv i d ual knows how their money flows can they adjust their lifestyle accordingly.
Once the important expenses of life have been covered (rent, food, etc) what’s left over expense- wise is most times discretionary and provides the opportunity to reduce those expenses or cut them out altogether.
Don’t compete
Many times people stray from what they can comfortably sustain financially when they try to “keep up with the Joneses”. Looking at what others are doing with their money and trying to replicate it is a recipe for financial ruin.
Sure your friends or neighbours might drive nicer cars, or take expensive vacations, but that doesn’t mean you have to do the same. Making decisions on the basis of what’s best for you financially pays richer dividends than trying to emulate the lifestyle and spending habits of others.
Avoid splurging
Nothing wrecks our personal finances faster than splurge spending. Before buying something that was unplanned and not budgeted for it’s important to think about the decision thoroughly.
Asking questions such as “Do I need it?” or “What will I use it for?” are all important considerations that should be given serious thought. Certainly the occasional splurge may have little impact on our ability to live within our means, but constantly doing so could eventually put our financial well-being at risk.
Save to spend
A critical aspect of living within one’s means involves saving. In fact, what an individual earns is way less important than what he or she is able to save. Saving up to acquire what is desired is often times the best way to go as it avoids unnecessary debt and can make the thought process about what we wish to possess much clearer.
Saving to spend also enhances the value we place on what we acquire since we know the sacrifices that were made to get it.
Do no (financial) harm
Ultimately, being conscious about our lifestyle and how it should fit into our income is a key step in living within our means.
Making decisions on what we can reasonably afford and maintain given our resources provides us with the ight balance to live well beyond payday.
