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Living below your means is living on less than you earn. In the process, you make decisions that make you financially strong. So many people around us just want to be one up on their neighbors or the people around them and like to flaunt their luxurious lifestyle. This makes them overspend on luxurious and material things that give them temporary happiness while they end up living paycheck to paycheck. Even though they may be earning a good salary or are well off in business, having no control over the expenses means they can’t think of retiring early in life even if they wish to. In contrast, a person who lives within means will always have money left for emergencies, meet their saving goals, and retire on time.
The best way to create wealth and achieve financial freedom is to spend less than you earn. Money management is a skill that you will have to practice and learn. Some of the ways by which you can learn to live within means are-
1) Track your expenses-
You will be aware of how much income you are making from all the sources. This may be from salary, rental income, or the freelancing side income. Add all of these and now you know the total money you are receiving. The next step is to note down all the expenses you are making for the month. Do this for a few months and you will know roughly how much you are spending every month. Making use of a budgeting app will make the process simpler. Tracking the expenses and not spending more than what you have planned for, will make you live within your means.
When you go shopping think for a moment whether you really need the item or will it simply add to the clutter in the household. Having many credit cards will not do any good if you don’t track the credit card bills. If you wish to avoid this do shopping with cash because if you don’t keep track of the credit card bills you may end up paying high interest which you will regret later. Saving for a few months for the item you need will make you avoid the credit card, make you much more independent, and finally, you will live within your means.
2) You are not in competition-
From a young age, we have been taught to perform better than our peers in schools and colleges. When a person grows up they are taught to be better than their neighbors, friends, or relatives in monetary terms. There is nothing wrong, but having financial security should be the first priority.
When a person sees that his neighbor has a new car then he is tempted to be one up and tries to buy a costlier car, or suppose the neighbor has a new TV or refrigerator you too try to bring a new model of these appliances. Whether you have money or not, you will buy it through a personal loan or a credit card without checking if it would be good for your budget. The competition for material things is endless and there is no limit to where it ends. So what a person should do is buy only the things which are necessary and not try to keep up with unnecessary competition as this could lead to a debt trap. Avoid social media as people always post their happy pictures which is not always true as people have their follies too which they don’t post.
3) Try to reduce expenses-
When you have a hard time living within your means take a hard look at your expenses. There are many places where you can reduce expenses. In places like Mumbai rent can range from 30% to 40% of your income. Try to move to a less premium location or if you are not married you can share the accommodation with some friends. When you go through your monthly expenses there are a number of places where you can reduce expenses like reducing the shopping trips or not going for branded labels. Doing yoga instead of going to a gym is another thing that you can do.
There are other places where you can cut or reduce spending. It can be on the monthly subscriptions or dining out. Instead of ordering food from hotels many times a week, you can have more home-cooked food. Then there is the beauty treatment, and the money spent on alcohol and cigarettes does not bring you any benefit.
4) Always plan for big purchases-
When buying a house or a car if you have the cash you can always negotiate for a good price. Know the reason for the sale of a house. If it is a distressed sale and the seller is in urgent need of money you can negotiate a better deal thereby helping you to save money.
Similarly, when you want to renovate your home you can work on all the things six months ahead. You can meet different contractors and work out the cheapest price after negotiating with the ones who have a good reputation. This would save you a lot of money.
For buying a car or a big TV set you should always plan ahead. When you know that your car is old and you need to replace it in two to three years create a budget for the car beforehand. If you save enough, you can purchase it with cash. When you have readily available cash you can negotiate with a car dealer or any private party because you are paying the full amount in cash.
What is the issue with buying a used car? A new car would be 60% less than its original cost after six years. Maybe you will be able to afford a used car and not have to keep paying the loan that you would have to take if you don’t have full money for a brand new car. The only thing you would have to do is to carry out some research on the models and select the one that has low miles.
5) Do the things yourself-
There are a number of things you can do yourself that can save you plenty of money. Painting your own house doesn’t require many technical skills. You can iron your clothes or even cut your hair. The other things that you can do are change your car’s oil, check your tires, change the car’s battery and also wash your car at home.
Besides this, you can refurbish old furniture, make your own detergent at home, and repurpose old clothing to make rags. Repairing appliances has become easier with a number of DIY videos. You can groom your dog and take it for a walk instead of keeping someone else for this purpose. Paying taxes by using online software can be tried instead of depending on the accountant. You can become a DIY investor if you learn a few things and manage your own investments. If you have a garden you can grow your own vegetables. These things save a lot of money to enable you to live within your means.
6) Bargaining-
There are a number of places where you can negotiate. You can negotiate your rent or even the deposit you pay for staying on rent. When you go for purchasing clothes you can bargain on the price at the shop. You can bargain on the commission or the brokerage fee from the property dealer who gets you the property for purchase or rent.
Besides this the daily vegetables and fruits that you go to buy, the purchase can be done after bargaining on the price. There are people who come to give your children tuition and you can negotiate with them. The services of the maidservant who comes for cleaning and cooking can also be bargained for.
There are a number of other places where you can negotiate. Let’s take a few more examples. The furniture shop, the car you wish to purchase, the house you wish to purchase, hotel rates during the lean season, the gym membership, and the electronics store. Bargaining can save you extra money every month enabling you to live within your means.
7) Make more money-
When you make more money after enhancing the necessary skills you can afford to live within your means. Earning more money, you will have the chance to live within your means, without changing your spending habits. But often people who earn more money change their spending habits and spend more; and in order to earn more money you may have to lead a very busy life leading to a lot of stress. It is always necessary to lead a balanced life.
8) Lead a healthy lifestyle-
When you lead a healthy lifestyle you will have to visit the doctor less. When you eat healthy food i.e. cut down on processed food, stop smoking, sleep well, and exercise regularly you will be able to keep the medical bills low especially when you age. This will tend to protect your savings when you don’t have a job in older age.
9) Plan before shopping-
Whenever you see there is a sale, you get excited and immediately jump for the offer. This can add over a period of time and there would be lots of unrequired things in your house over a period of time. If you wish to live within your means you have to avoid impulsive shopping. Whenever you go to a grocery or retail store have the list ready so that you stick to the list and don’t buy anything extra.
Unsubscribe to the marketing emails. Whenever you see something new online, don’t just purchase it. Wait for 24-48 hours and think if you really need it or if it would remain just stockpiled in your house.
10) Set financial goals-
When you have financial goals, you will know that you will be investing a certain amount every month to meet the goals. This way you will live within your means and not spend on unnecessary items. You can also take the help of a financial advisor for this purpose.
Living within means is important as it keeps you away from piling debt, which in turn leads to a stress-free life. When you have enough money and move according to your financial goals you can always retire on time without any worries and live a life of fulfillment.