You have heard it a thousand times, live within your means. Seems like common sense doesn’t it? Of course it does. Nothing I tell you is some deep dark secret that has been hidden in ancient scrolls just waiting to be revealed to the world. If it was easy, however, we would all be millionaires.
Living within your means, in its simplest definition is living a lifestyle in which your expenses do not exceed your income. This, however, is not good enough to get you out of debt, help you climb the Debt-Free Ladder, and begin to build wealth. You will need to go one step further and live below your means. As far below your means as you can possibly live.
Living below your means is the only way to be able to establish your emergency fund quickly and then have extra money each month to throw at your debt.
Living below your means will require establishing a monthly budget in which every single dollar is accounted for. This means you know exactly how much you will have and where every single dollar of that income is being spent during that month, before the month begins.
That last part is very important. Create your budget before the month begins or on the first of the month. This will insure that it is a true budget instead of a log of where your money went. Proactive instead of reactive.
For those new to budgeting, it will be an eye opener to see exactly how much you may be spending on some items and how much you actually should have left over to spend on your debt if you didn’t go out to eat or go to the movies.
The key concept of a budget is to break your expenses into categories such as household (utilities, etc.), auto (gas, maintenance, etc.), groceries, and so forth. You will then assign the dollars from your income to these items until the balance is zero. Every flat should go somewhere. I will get into the details of a budget in another article.
Living below yoir means may also mean that you put aside your ego. You may not be able to get the latest and greatest gadget, clothes, or see all of the hot movies. This will be temporary since you will eventually be debt-free and will be able to spend cash on these items after you build wealth. Keep your eye on the prize as they say.
If you are already living above your means, you may have to sell items or increase your income to begin living below your means. This is a very difficult realization and adjustment for some people and usually takes an extreme moment of being fed up with debt and the current situation they are faced with.
Living below your means is key to being able to climb the Debt-Free Ladder. Without doing so, you are adding a few hundred pounds on to your back for every rung.
I believe you can do it, you just need to believe you can do it. Share your journey in the comments section.