Tips To Help You Live Within Your Means

The first step to financial independence is to live within your means. It’s simple. You have to spend less than you make so you can save and invest the difference. Being financially responsible is important for your health and your financial life. To “live within your means” means that what you spend each month is less than or at least equal to the amount of money you bring in each month. For many people, it’s a lot easier said than done.

Tip #1. Know your income and expenses

The first thing you need to know is what’s coming in and what’s going out. Make a list of any and all income you have from your job, side work, pension or anywhere else. Then make a list of every bill you have, from rent to a car payment.

Tip #2. Spend less money than you bring in

Once you know how much you make, you can focus on reducing your spending to fit your income. If you don’t have one already, create a budget to plan your expenses and use it to keep your spending on track. If you’ve already tried budgeting and it didn’t work, try it again. Sometimes you just need to make some minor changes to your budget to get it to work.

Sometimes budgeting in a stressful financial situation is overwhelming. Try a method called “backward budgeting.” Write down your income, then start subtracting each expense you pay each month. If you get to a negative number, then you’re spending too much and need to cut back.

Tip #3. Wants Vs. Needs

Separate the wants from the needs. If you need to pay for school loans but you get coffee from your local coffee shop every day then make sure to put paying off that school loan first. At the end of separating those needs from wants, you can

Tip #4. Increase your income

If your expenses are at the bare minimum and you’re still spending more money than you make, then you make need to boost your income. If you typically get a tax refund, you may be able to adjust your tax withholding to get more money in your paycheck. You should also make sure you’re signed up for the right health, disability, and other company-provided benefits. Finally, you may need to get a higher paying job or even a second job to help make ends meet. The key is to do what you need to do to make enough money to pay all your necessary expenses.

Tip #5. Pay in cash

It isn’t always easy or immediately gratifying, but adopting a pay-in-cash lifestyle can save you from falling into a debt trap. Needing certain things in a bind usually causes us to borrow money from credit cards. This usually results in digging ourselves in a bigger hole than with what we started with. Covering debt with debt is the worst thing you could do – even with the mindset of “I’ll pay this next week” or “I’ll make sure to only use this amount”. Saving up cash for your needs is a sure-fire way to steer clear of using any money that isn’t available.

7. Save money wherever possible

Saving money will help you stop overextending yourself financially. Try these tips to get started:

  • Never walk into the grocery store unprepared. Before you shop, clip or print out coupons, check the weekly circular, and make a list. I estimate I save about $40 a trip this way.
  • Skip designer coffee. Sure, it tastes fantastic, but it’s also $4.50 a cup. Make your coffee at home.
  • Buy secondhand. You can find incredible deals at garage sales or in thrift shops.

8. Be happy with what you have

Having a new dress or a new purse makes us happy temporarily but it doesn’t help us live within our means. Sometimes we need to appreciate the things we already have and buy that new dress or purse more scarcely.

Living within your means is buying mostly things that are needed and not going over budget all while trying to save. How are you living within your means?