In tough economic times,
people are looking to cut corners in any way possible. This article
gives simple advice in order to live below your means. The tricky part
is to actually do it!
Things You Will Needa budget
a savings account
Step 1Start with a budget. Figure total income, total monthly debts, and how much can be eliminated from the monthly budget. The key to creating a budget is to ensure a certain percentage of income is dedicated just to savings in order to live below your means.
Step 2Once you've determined exactly how much you can afford to dedicate to savings, not only as a percent of your pay, but also as an actual dollar figure, look at your budget again. Are there any costs you could trim, or take out altogether?The point to living below your means is not to live like a pauper. Be sure to add a little money into the budget just for fun, like going out to dinner or splurging on lattes. The point of living below your means is to limit the amount spent on unnecessary things without eliminating unnecessary spending altogether. Attempting to eliminate all unnecessary spending, if you can afford a little fun money, is bound to fail because of the psychological implications of limiting yourself too much.
Step 3Once you are sure you have a set percentage of money dedicated toward savings, be sure to set up an automatic transfer every time you get paid, so that your pay check goes from your checking account to your savings account automatically, without you having to think about it.The less you are directly involved in putting money into savings, the less you will want to spend the money instead of saving it. A good percentage to aim for is 10% of your take-home pay. While you may not be able to start out saving 10%, it's a good goal to work toward.
Step 4After you've had the automatic transfer set up for a while, you'll eventually forget about the extra money going into savings when preparing your weekly and monthly budgets. Be sure you don't forget about the money altogether, though! Keep it in your savings in case of emergency. This way, hopefully, you won't have to put your emergency on your credit card. Building an emergency fund of 6 months' worth of expenses in case of job loss is a good goal to aim toward. This emergency fund should be able to cover you in case of emergencies around the home, such as the furnace going out in the middle of January or a medical emergency.
As previously stated, this all seems simple on paper. The key to living below your means is to take the plunge and give it a shot!
Tips & Warnings
- Start small. If you think you can only afford to do without five dollars a week, then start by putting five dollars a week into savings via automatic transfer.
- The automatic transfer is key here.
- Make sure you only use savings in this scenario for an emergency. Once you have an emergency fund set up, fully funded, then think about saving for something else.
- If you need to, take money from your emergency fund rather than using your credit card.