For many people, money woes stem from lifestyle choices that their salaries cannot support, not a lack of income.
Do you long to feel a sense of financial freedom and wonder when you will ever get enough money to enjoy it? The truth is that if you are living beyond your means, you will never have that feeling, regardless of your salary. For many people, money woes stem from lifestyle choices that their salaries cannot support, not a lack of income. If that describes you, take these steps to start living within your means today. If you stick to it, you will find financial freedom, too.
Know Your Worth
Swallow the hard pill of reality and conduct a net worth analysis. It will likely be a sobering view of your financial status, but you need to know your net worth before disaster strikes.
Determine your worth by adding everything you own outright, including the money in your retirement and savings accounts and the equity of your home. Then, total everything you owe, including student loans, credit card bills, car and mortgage payments and taxes. Arrive at your net worth by subtracting assets from debts.
If the number is negative, you are living beyond your means.
Most people who live beyond their means have no clue what living within them actually means. For one month, live on cash alone to instill habitual behavior and understand what it takes to make your real income last a full billing cycle without “enablers” like debit and credit cards.
The experience will force you into being more thoughtful about how you spend money. The meaning of impulse buys, fast food, nights out and mileage will change drastically, and you will be less likely to spend carelessly in the future.
Put Needs Over Wants
The majority of 25 to 34 year olds have a smartphone, but many have also moved back in with their parents because of economic conditions. It may be hard to go back to an old-fashioned flip phone, but you have no business buying an iPhone if you cannot pay rent.
Seriously evaluate your belongings. If your closet is overflowing with last season's clothes, sporting goods, books and old technology, you already have more than you need. Curb your spending by using what you already have and focusing on your needs, not your wants. Knowing the difference between the two is an important step toward financial freedom.
How do you cut spending and stick to a realistic budget? Share your best tips in the comments below!