To create financial breathing room in your life, it’s important to live on less than what you earn. The less you spend, the more you can save. And eventually, you’ll be able to start building wealth. But where do you begin?
Tips To Live Below Your Means
Let’s talk about some ways you can make sure you are living within, or even better, below your means.
Create a Budget
Create a monthly budget and stick to it. Creating a budget shows you exactly where all your money is going each month. You want to include all of your monthly expenses such as house or rent payments, utilities, loans, groceries, savings, maintenance costs, childcare and anything else that you're spending money on.
Once you have your budget set up, subtract your monthly expenses from your monthly income. You should have some money left over if you are budgeting correctly.
If you end up spending more than you are bringing in, it is time to reassess your expenses and lifestyle and decide what expenses you can eliminate or reduce.
After creating a budget, track your spending. You can do this with a simple spreadsheet or use an app that will do the tracking for you. When you record each purchase, make sure you're aware of the money you're spending and what you are spending it on.
You may find that you’re wasting money, and then you can decide what is important and what is not and make adjustments accordingly. This process may help you to start thinking twice about each purchase you make.
Use Credit Cards Wisely
Credit cards can be a powerful tool when used responsibly. Pay your monthly expenses using your credit card to earn cash back and other rewards, but be sure you pay it off in full each month. You can easily get in over your head if you use credit to make purchases you can't afford.
Reduce unnecessary spending. You can start by reviewing all your expenses. Look at things like magazine and newspaper subscriptions, gym memberships, wholesale club memberships, streaming services and cable TV, expensive cell phone plans, entertainment expenses, services like manicures, haircuts, lawn care, takeout food and coffee, clothes, household items and other things you regularly spend money on.
Almost all of us can eliminate or reduce many of these expenses and are surprised to find just how much we’re spending on them.
Consider finding a less expensive place to live. Housing and car payments are the largest monthly expenses for most people. Can you downsize your home? Move to a more cost-efficient apartment? Relocate to an area with lower property taxes? Refinance if lower rates are available? Drive a less expensive vehicle? Eliminate a vehicle?
These are all questions to ask yourself. And downsizing can save a huge amount of money. Even if you are just saving $100 a month on living expenses, that adds up to $1,200 a year.
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Credit: Jason Getz / Jason.Getz@ajc.com