8 Ways to Live Below Your Means



Nick Carroll

@nickwcarroll


Living within your means implies your expenses do not exceed your income. With proper planning and budgeting, your financial plan every month is designed to put money towards your retirement, savings, and other financial goals while being able to pay expenses such as utility bills, credit cards, and other loans responsibly which does not result in additional credit every month.

When I first started learning about managing money, I had the pleasure of being introduced to the Jones family. They had everything. From the latest big-screen TV to the most beautiful car on the block, envy quickly seeped into my soul.


Having an illness of the "I want it!" can be challenging to cure. After all, marketers and advertisers make millions to billions to influence and to make you want to buy their products. For example, Apple reported having spent $1.8 billion on advertising from its budget.


With such powerful influences, it has caused and continues to create problems for many households. According to a 2015 Nielson study, "25% of American families making $150,000 or more a year live paycheck to paycheck. One in three households earning between $50,000 and $100,000 find themselves in the same predicament."


It goes to show that no matter how much money income earners bring into their household, financial dangers can still loom when not living within one's means.


When you want to lead your family out of debt and on a path towards financial freedom, you have to ignore the marketers and that inner voice inside your head telling you to buy it. Max Lucado once said, "A man who wants to lead the orchestra must turn his back on the crowd." Turn your back on the Joneses and find a diagnosis to cure the "I want its!"


In this article, we are going to help you by sharing # ways you can live within your means.


1. Start Budgeting

2. Avoid Procrastinating

3. Ward Off Credit Purchases

4. Kick Out the Joneses

5. Set Up a Savings Goal

6. Cut Expenses

7. Increase Your Income

8. Make Smarter Financial Decisions

9. Buy Assets



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1. Start Budgeting


To start, do you know what a budget is? A budget is your cash flow plan assigning every dollar to a category and expense at the start of each month. Examples of a few monthly cash flow categories are food, clothing, and medical/health expenses.


Financial experts will tell you that budgeting is 80% behavior, which means you don't have to be an expert on managing money. You need to know where it goes when it flows in.


"A budget is simply telling your money where to go instead of wondering where it went," says John Maxwell. In our article, How to Build a Great Budget for Your Home, we walk you step-by-step, so the process is easy to follow.

If you want to know how you can live below your income, budgeting is where it all starts.



2. Avoid Procrastinating


Every bill you receive has a due date. If it weren't for due dates, odds are you would push your payments to the next month or forget you had bills. When it comes to managing your personal finances, there are no deadlines for budgeting or managing your money.


Fortunately, having a financial roadmap establishes milestones. It's necessary to have these in place for accountability.


You can avoid procrastination by paying off your credit cards and not paying the minimum balances every month. This practice only prolongs the debt allowing your debt to continue to linger, consuming your future earnings.


Don't delay in creating your payment plans if you are unable to pay off your debt every month. Build a plan and establish a payoff date for each debt..

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3. Ward Off Credit Purchases

Low-interest rates and credit card rewards can seem enticing, but credit encourages you to spend more. Sure, it looks simple to pay back the balance in full and on time each month to avoid fees and interest.


The truth is, research reflects consumers do spend more when using credit than with debit purchases. The spending is 100% more, according to a published MIT research study.

With catchy phrases such as "Enjoy now. Pay later." or "...easy, fixed monthly payments" it is why lending firms such as AfterPay and Affirm are trending and excelling past other lenders.



4. Kick Out the Joneses


The Jones family has crept into every facet in the home. From tech gadgets to subscription boxes, consumers are bombarded with emails, ads, tv commercials, etc., as businesses are fighting to get your money.


It's time to say enough. Pay for only what you can afford. If you can not reasonably make it until your next paycheck, find ways to reduce your expenses. This is also a tell-tale sign that you're not living within your means.



5. Cut Expenses


A tremendous advantage of creating and following a budget is that it provides a visual of where you can cut expenses. There have been numerous times when I review my monthly budget and wondered how some items got on the list. It's a great reminder that every month, you have to pull yourself back to live within your means.


Just to share, during my budget review, I circled expenses for the month that were discretionary that are things I enjoy but don't need. For example, I was paying for a monthly music service that I rarely used. I was able to go online and cancel it immediately, saving me $15 a month.


Next, I saw I had increased my phone bill because, over the holidays, I traveled a lot and had changed my phone plan to increase the data service. Now that I'm back home, I don't need the extra data because I have access to wifi, so I opened the app, downgraded the service, and saved $30.


These two small steps took me ten minutes and saved me $45 for the month, which is now being used to add dividend-paying stocks to my investment portfolio.


I recommend you read our article, 18 Ways to Reduce Household Expenses, to help you generate some ideas saving you money this month.



6. Increase Your Income


There are some scenarios when every budget is so finely tuned, and no fluff or extra income is available to be squeezed from a budget. What does one do this case?


At this point, I recommend seeking additional income. This means getting a part-time job delivering pizzas, driving for Uber, working online for Fiverr, etc. Even working for just two months part-time for additional income can be a big blessing by knocking out some debt, which will free up extra income.

Another option is to go through your stuff in the garage or attic to find items you can sell online. In a Bankrate.com article, they share "Where to sell your junk for cash," and this will give you several ideas where you can sell your items.


Be sure to check out our page, Earning Income, where we share several resources on earning extra money for your home.



7. Make Smarter Financial Decisions


Warren Buffett says his number one rule is, "Don't lose money." His rule can apply to everyday spending.


Check your buying habits. Odds are, you have tendencies to splurge when you can easily cut back. Just saving a dollar a day can reap benefits when you invest that into a stock that can generate a 10% dividend yield every year.


More importantly, you can make smarter financial decisions when you receive a pay raise. A common habit that most, if not all, people make is when they receive pay raises, they use the extra money to buy more stuff. They may switch from generic food to name-brands. They may purchase new clothes with the difference.


What if instead of spending the pay raise, you saved it. By holding yourself accountable to live within your prior income, you can keep those additional dollars towards an asset that can generate extra income. Read below.


8. Buy Assets


Buying assets when you are struggling to make every dollar stretch may sound counterintuitive, but it's not.


In Rich Dad Poor Dad, by Robert Kiyosaki, he mentions that nobody enjoys being poor or living paycheck-to-paycheck. A strategy that he uses is to seek out to purchase assets that can pay your liabilities. He isn't referring to buying a new home or a new car. I recommend you buy and read his book if you are serious about taking control of your financial future.


So how do you buy assets when you have no money? The first step is to write down where you want to be in 5 to 10 years. How much do you want to earn or make?


Next, create a milestone chart to hold you accountable. For example, if your goal is to own a rental property, you have to start small. Starting small gives you the practice to hone your skill. Save up to $40 and go garage selling. This doesn't give you an excuse to buy things to put on your shelf. Instead, look for items you can flip.


From the profits, reinvest by buying more and selling those online until you can save enough to buy a plot of land. Now you have some collateral, an asset that holds value. Things start to get exciting now because you have created an opportunity for your asset to generate money.


You can rent out this piece of land, hold and sell for profit, or buy an affordable house, mobile or modular home, or camper to rent out on Airbnb, etc.


From these profits, you can reinvest these into another property or sell this asset and buy something more significant that is capable of generating more income.


Typically when consumers think of buying assets, they assume they can't afford it, but changing your mindset to establish milestones to reach your goal is very doable if you put forth the effort.

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