There is a state of mind that is extremely beneficial to have if you’re in debt or are just generally looking to be in a better financial position, and that is to live as if you make around 75% of the money you actually make, or to live within/beneath your means
So what does living within your means entail? In the most basic of terms it means don’t spend more than you earn, but what you should be aiming for is to spend less than what you bring in as household spending money.
If for example you were on a salary of 40,000, your aim should be to live as if you only earn 35,000 if not less. Lots of people will read this and feel that they cant simply stop spending that much money or they would have done by now, but there is some advice for you to have.
A lot of people could cut out quite a chunk of their expenditure as people tend to think of certain leisure purchases as essential when in fact they could go without them. This includes things like holidays, new clothes if you’ve still got clothes in your wardrobe, trips to the pub or buying replacement household items when they don’t really need replacing. A lot of these little expenditures could be avoided or at least put off for a while.
Many peoples past decisions and financial commitments will prevent them from being able to considerably cut down their spend, but if they had lived within or beneath their means from day one, then they would be sitting on a nice saving by now and have relative financial freedom.
If you are in one of these situations then obviously the ideal solution would be some sort of time machine, but unfortunately we are fresh out of those so instead, try to use the vision of what your life could be like now if you had lived beneath your means as inspiration to work towards a new standard of living in five or ten years time, even if it means a lower living standard in the mean time.
Credit cards play a huge role in most peoples financial problems, only in the most dire circumstances should a credit card ever be used to buy anything, even if you know you’ll be able to pay it off next month. This is because if you get into this habit, you end up chasing zero i.e. you are always in debt and as soon as you pay it off one month, you have no money left for that month so you have to go back into the red. Paying for things on a credit card can easily turn into a slippery slope of debt and rising interest rates.
Although not using your credit card appears to be shrinking your bank balance faster, in the long term it will be highly beneficial. If you endeavour only to spend your own money and not the banks by living as if you earn only 75% of what you really do and really thinking about whether or not you NEED absolutely everything you go to buy, then you will watch your overall debt begin to fall away and you will be on your way financial freedom.
Tags: advice, banking, Credit, debt, economy, Finance, financial advice, income, lifestyle, money, self improvement