It sounds simple, doesn’t it? But surprisingly, only a few people do it. What does living within your means is, and why is it important?
Simply said, it is about spending money that is less than your total income and / or assets combined. This is the simplest, yet most effective way to live a debt-free life! What do I know anyway with finances?
Just like many of you, I’ve been there. It has been a struggle. I have to admit – I’ve had those stages in life where I feel like the sky is the limit when it comes to buying things. As a matter of fact, I even forgot what my means were, which is the first and the most important thing that I have to remember when it comes to budgeting. What are your means anyway? To make it easier for you to understand, let’s break it down into the 5 most common problems, and let us discuss a solution for each of the problem. Let’s begin! (This can be lengthy, and there’ll be a part 2 of this. For now, let’s talk about the top 3 problems)
1. Spending money you still don’t have.
Do you know those buy now shop later schemes? Oh, I love them! There’s this thinking that, “I earn xx.xx amount, and I’m pretty sure I’ll be able to pay it in no time!” Or, “shoot, I’m short in cash, but I loooove this bag! It’s okay, I’ll get a loan from the bank. It’s payable in 6 months, I’m pretty sure the interest won’t affect my budget that much.”
These are typical scenarios where most people end up spending money they don’t have yet. Another example would be the use of credit cards! “Oh, I love shopping! I can buy whatever I want!”
As you can see, the common problem here is that most of us would think that “I can pay that amount in no time.” Or, “I’ll be earning this much in the next few months, I’ll spend this much this month, and cut off on my expenses on the next couple of months so I can compensate with my spendings.” In the long run, you won’t be able to control your budget, because you’ll have the exact, same mentality, and being able to cope up with your debt gets more difficult.
The Solution: Don’t spend money you don’t have yet. It is important that you only spend money that’s within your budget, which brings us to the second problem. Come to think of it – get rid of your credit card, unless you want to shop cashless and you already have the money to pay for you next credit card’s bill. For example. You want to buy that expensive iPhone 7 that just came out in the market. It hits approximately P50,000. Do you have extra 50,000 right now? If yes, then go ahead! Pay for it – regardless if cash or you’ll use your credit card (I can’t blame people not wanting to bring cash along with them when shopping). But if you don’t have P50,000 and you’ll pay for it on the next succeeding 12 months of your employment, then don’t. Just don’t.
2. Budgeting is too old-fashioned. It’s time-consuming and unproductive!
I don’t know about you, but budgeting is an important aspect in my life. Every month, I list down the money that I’m expecting to receive – this includes my salary and the money that I’ve earned from my online business. Without a budget, it’s difficult to foresee upcoming bills to pay. How will you even know if you have spare money this month if you don’t list down your budget?
The Solution: Make this as a part of your daily routine. Sit down. Write it in a planner, or create a spreadsheet that you can track. Write down your expenses and your income. Does it add up? List down all the things you’ve paid for, every last cent of it. This way, it’ll be easier for you to see analyse if you’re spending too much on something, or if you still have spare money to buy some of your wants. I use an app called “Spending”. It allows me to track down the things I’ve spent for the day, my income, and give me an overview of the money that flows in and out. This gives me an idea if I’m overspending, allowing me to revise my budget and be more strict about it.
3. Can’t Identify Needs From Wants
“I need this expensive diaperbag!”
“Because all the other mommies in my mommy group are raving about it. I’m the only one left and this can’t be!”
Okay, maybe it’s not that exaggerated, but how many among you have mistaken something that they want for a need? When working on your budget, start first with the things that you really need – your necessities – things that you won’t be able to survive without. Utility bills, house mortgage, and the likes.
The Solution: Ask yourself, “do I really need it, or do I just want to have it?” Don’t get me wrong, there’s nothing wrong with buying things that you love, as long as you have the money to support it. Make sure that you have emergency funds, before you go on a shopping spree. If you have a set budget for your house rent, car mortgage, kids’ education, then make it a habit to budget a certain amount of money to use for your shopping.
We’re all mothers now. We have to think about our daughter’s and son’s future. We have to consider the sacrifices that our husbands go through just to give us the life that we want. We can’t mess it up because you can’t handle your finances properly. Remember, live within your means. If you know that you’re not able to buy it, then don’t. It’s not the end of the world. Be happy with what you have right now. Don’t be contented with what you’re earning though. Strive hard and do something about how you can make more, but don’t make it the center of your life. Living with your budget’s parameters may not be easy – but we don’t need easy – we need possible.
What are the things that you think you can suggest to help us live within our means? I’d love to hear your stories too. Feel free to comment them down below, and if you think a friend, or a family member needs this advice, feel free to share. 🙂