5 Practical and Non-Hacky Tips to Living Within Your Means
Many of us desire to live a quality life and become financially stable. We wish to buy the stuff we need and want and still have a lot more left to save and invest.
The reality is that our financial fantasies are not often translated into what we experience in real life.
Unfortunately, thousands of people have become victims of an economic system that thrives on loans and the interests attached to them.
From student loans to mortgage, an average American devotes most of his working hours to cover his debts and the interests that come with them.
It’s blood-sucking but also avoidable with enough financial discipline.
Below are five practical ways to avoid falling into the credit trap:
1. Estimate Your Monthly Income
Add up all the income you’ve earned from your main job and side hustles. Transfer payments and monetary gifts should be included.
Create a list of bills and taxes, fixed expenses, and other necessary payments for the month. Subtract this figure from the result of total monetary income.
This way, you can determine the cash you have control over before you lose control over the way they are spent.
This is the first step to a lifestyle adjustment. Apps like 1Money and Money Manager are useful for this purpose.
If your income is higher than your expenditure, you’re safe. If it’s lower, then you need to either downsize your living or find another source of income.
2. Resist the Pressure of FOMO
FOMO is the fear of missing out on what others are apparently enjoying.
This fear is detrimental to your finances because it leads you to spend on activities you don’t truly want to do.
The content we consume on social media gives us the impression that we’re the only ones missing out on the fun things in life and so we try to ‘belong’ by buying things and going places we don’t really want to be in.
The remedy to this is conscious spending.
Ramit Sethi, author of “I Will Teach You To Be Rich”, explains in an interview with Matt D’Avella how people could practice more of conscious spending:
“So I would love for people to develop their sense of what they truly love and what they don’t really care about... A lot of people, if you ask them: what do you truly love spending on? There tend to be some clusters. Wellness is one and that could be organic meat, it could be training, it could be going on a retreat to Tulum. Relationships are a big one. So the point I’m making is: ask yourself what is the thing that I love and what if I doubled my spending on it? Well, in order to do that which would give you joy, you probably have to cut back on the things you don’t really care about.”
3. Reduce Lifestyle Expectations
We tend to mirror the actions and habits of people we surround ourselves with.
When a close friend gets a new phone, we feel prompted to get one too. When a relative plans a vacation, we start thinking of how we can afford that too.
This isn’t a bad thing, but it becomes threatening to our finances when we consistently upgrade our lifestyle to the level of the people we keep around ourselves.
Now, I’m not suggesting you should leave your friends for people whose finances are compatible with yours. What I’m suggesting is to learn how to say ‘no’.
Say no to a lunch date you cannot afford and suggest somewhere cheaper. Say no to a vacation you want to give yourself when it’s not the right time. Say no to yourself and others when you sense your finances can’t bear the weight of what’s at stake.
When we place a lot of expectations on our income, we inadvertently give ourselves more pressure than we can contend with.
There’s nothing wrong with being ambitious but knowing the right time to spend is key.
4. Rethink Buying Brand New
Buying brand new gives us the assurance of purchasing an item that isn’t faulty and is of high quality and value.
This is a valid reason because thrifting comes with more risks and less accountability. Items like mattresses should be bought brand new to avoid the risk of bedbugs.
However, there are items that we should thrift depending on our income and budget.
Quality clothes, for instance, that are sold in thrift stores are more promising than new clothes purchased in fast-fashion stores.
This is because second-hand clothes have stood the test of time (and a lot of washes), and are still durable and wearable.
We save a lot of money over time when we get accustomed to thrifting items like clothes, home decor, books, and even vehicles.
Charity shops, vintage stores, and the online marketplace are good places to start with.
Save the planet and your wallet by thrifting more.
5. Don’t Rely on Credit
This is the tip that lays the most emphasis on financial discipline. Maintaining discipline when it comes to finances is difficult, but a major leap to making it easier is to rely less on credit.
“As of 2017, Americans had more than $1 trillion in credit card debt. That’s more than $4,000 for every adult living in the U.S. And the average American had more than $6,300 of credit card debt.”
Thousands of people have becomes slaves to their accumulating debt because they fell into the credit trap.
The fact that you use your credit card to purchase items and services simply means you can’t afford them.
If it’s not for emergency purposes, stay away from loans and credit cards as much as you can!
Here are 3 major steps to achieving financial freedom:
- Track your spending: this gives you an idea of where your money is going. It allows you to cut back on the things you don’t truly need but find yourself spending on consistently. This helps you gain financial traction.
- List your financial goals: this step entails you having a clear picture of your expenses and how you intend on covering them with your income. This also gives you an idea of where you need to spend money the most and where you can compromise spending money.
- Have an emergency fund: we all know the phrase “save for a rainy day” but many of us take it for granted. Financial responsibility entails saving a portion of your income for unpredictable days and moments. Instead of spending that extra cash on eating out or adding an extra TV subscription, consider saving it for a rainy day.
The Financial Takeaway
Money is a huge part of our lives that none of us can afford to take for granted.
For this reason, we owe it to ourselves to maintain discipline around it and spend on what we can actually afford.
Living within one’s means comes naturally to some people while the rest of us have to learn and imbibe this habit.
It may take a while, but keeping these tips in mind would keep you on top of your money game:
- Estimate your monthly income
- Resist the pressure of FOMO
- Reduce lifestyle expectations
- Rethink buying brand new, and finally,
- Don’t rely on credit.
