Living below your means doesn’t mean making savings and cutting costs. It’s about controlling your finances so that it doesn’t have control over you.
If you’re living below your income, you can deal with the unexpected repair to your car or medical expense, and save to fund your retirement desires, be it an old-fashioned house or the start of the first Etsy business.
A good guideline is to live at a minimum of 15% less than what you earn. Here are our top suggestions for staying within your Budget and not feeling like you’re wasting your money.
Make a plan for your money.
The process of assigning a task to every dollar can be motivating. The well-known Budget of 50/30/20 is a way to divide the money between categories of wants, needs, and savings, as well as repayment of debt.
“Make the financial decisions for the month in the peace of your mind and with your companion before the month — not right now. This way, you’ll be confident about Budget,” says Charlie Bolognino, an expert certified financial planner from Plymouth, Minnesota.
Save off the top
Make sure to withdraw money from every paycheck before you’re tempted to do it. Once you’ve begun the process, it’s easy to save money through 401(k) pay deductions at work and automatic monthly transfer to an investment or savings account.
Make sure you pay yourself.
If you’ve paid for something, whether it’s an automobile, smartphone, or college education, you can continue paying the same amount each month you’ve been used to, but make your payments to yourself. Put the money in an interest-paying savings account and let it build up. When you are ready to purchase something, you can pay cash and feel nothing like being deprived.
Make a living off one income.
Many families with two incomes naturally plan their lives based on the money two jobs generate. But think about the benefits of making a conscious decision to live on a single payment. If you can, organizing your household expenses so that one person’s salary covers costs can provide a significant amount of financial security.
Earmark is the second pay period to maximize retirement savings for investing or repaying debt. This also allows for flexibility in situations like a sudden loss of employment or the need for one parent to stay home with children.
Reduce unnecessary expenses
Are you dining out too often, subscribing to boring cable channels, or paying for memberships that you don’t use? The elimination of costs you don’t need to worry about frees you up to invest in things you truly love.
Do this: Note down what you are most proud of in your life. Examine your most recent financial statements. Do your spending habits match the values you have set? Perhaps minor changes can allow you to reduce the amount you spend on unnecessary items.
Make sure your home is right-sized
Be cautious about purchasing the biggest house the bank claims that you can afford. Instead, opt for a modest fixer-upper, and then make it your own. So you can live in your home without being burdened by the cost of homeownership, such as taxes, insurance, and maintenance.
Drive a used car
Do you require a brand new car that will lose 20 percent of its value when you take it off the road and is accompanied by an annual payment of $500? If you purchase a previously owned car, making a cash payment will take away the hassle of an auto loan and other costs associated with owning a car.
“Remember that your car is only a vehicle. Manuel says that rental agencies that have used cars are a good” to purchase, “low mileage and covered by warranty.”
Pay less interest
If you have debts from high-interest credit cards, consider the possibility of consolidating debt to reduce interest. If you have good credit, you may be qualified for the balance transfer credit card with 0% interest for 12 months or more. Pay attention to charges for transfers, and make sure to transfer only the amount you can pay off before the initial period ends and the rate increases.
Refinance your loan with an interest-free personal loan from an institution like a bank, credit union, or online lending institution. You’ll be free from debt and move to other significant goals quicker with lower interest rates.