You’ve heard it before and it probably makes sense, but living within your means can be hard and sometimes one wonders whether it’s even worth it. Why deprive yourself from all that life has to offer simply to make you budget balance? Let’s look at what it really means to live within your means and how this can propel you on your journey to financial independence and wealth!
What is living within your means?
“Living within your means” simply means that you spend less money than you earn. As easy as that.
So whether you earn R3,000 or R20,000 (or more), you need to spend less so that you have something left.
It sounds easy enough, especially if you’re a higher earner, but the difficulty is that there is just so much to buy and have and experience! Why work so hard and then suffer with little? Why not show you friends and family what you have achieved? And of course, why not live in a nice house and have nice things?
It can be a tough balancing act so let’s look at why it’s so important.
Why is it important to spend less than you earn?
It’s one thing to live life now and enjoy life to the fullest. But if you don’t have any money left at the month and are unable to save anything, you will unfortunately never build wealth. In fact, you will go the opposite direction and build debt.
You can enjoy life and have lots of great things using debt, but this forces you to always have to earn income to pay for it. You become a slave to your job and always need to work harder and harder in order to earn more. The downside of this is that you will probably struggle to retire one day because as soon as you stop earning, you won’t be able to pay your debts, and this may lead to an unfortunate situation.
Also think about what may happen if you lose your job, or if something else unforeseen happens. And don’t forget the general stress related to debt.
If however you spend less than you earn, you will have some money left at the month. This allows you to save it, invest, and make your money work for you.
Having “extra” money allows you to start feeing a sense of freedom. Freedom of choices and time.
If you know that you have enough money saved up to see your through 2 or 3 months of expenses, you may be more inclined to search for that perfect job you want. Or perhaps take a much needed break and use unpaid leave. Having extra money also takes away the stress of not knowing how you’ll survive the month. Think about how this could feel for you.
How to live within your means
Saving and investing is not only for the rich, it needs to start as soon as you start earning money. Keep some aside for you and your future. Start building wealth and creating the life you want.
A part of all you earn is yours to keepThe Richest Man in Babylon, George S. Clason
This is easy in theory and easy to read about, but it’s hard to do! Especially if you’re new to this. But you essentially need a budget and need to get into the habit of using it and tracking your expenses.
It requires you to:-
- Know what you earn,
- understand how much you spend and where your money is going,
- track your spending and adjust your plan when things veer off,
- pay yourself first when you next get paid.
How do I start?
Here are all the resources you need in order to improve your finances, live within your means, and start creating wealth!
Start right now by reading this: Help! Where’s my money? This will guide you through understanding where your money disappears each month.
Learn about cash flow and understand what it means in your personal finances.
Next up, go through this free budgeting course with videos and a workbook. As the name says, a free course to get you started with your very own personalised budget.
And then if you’re ready, start going through the complete series of the basics of personal finance. There are 22 posts that take you on a journey of improving your financial situation.
So much to read and implement! Exciting times ahead!
But I have lots of debt
You may be wondering if any of this is possible. It sounds great but what if you already have a ton of debt and are struggling to survive each month?
You’re not alone! Really! So many South Africans are struggling with debt and struggling to make ends meet. There are many reasons for this and it’s not just poor financial decisions that have lead to this crisis. But, you can deal with your debt and learn to manage your money better.
Take a look my Guide to Paying Off Debt which is based on my personal experience of dealing with debt and learning to start living within my means.
Living within your means
There is unfortunately no magic wand to wave that will solve your financial problems. And living within your means is not necessarily easy or even possibly at this very time for you. But, it is a very achievable goal and everyone can work towards improving their finances.
Learn to manage your finances well today so that when you earn more, you make better decisions.
What do you think about this? Please leave a comment or catch me on Twitter.