There is always that time of the month when you ask yourself: “where did all my money go? I just got paid few weeks ago.” The fastest way to find an answer to that is taking all the receipts laying around in your house add them up, read some of your messages and look at some of your recent pictures to get a clear understanding of where your money went. Most of financially independent people when asked how they did it, the most common answer is living below their means, spend less than what you earn.
7+ tips to start living
below your means
1. Master money
Is money your master or your servant? Control money don’t let money control you. The first step is to understand the relationship you have with money, how do you see it? are you comfortable talking about money? ( See related post about the different relationship with money Let’s talk about it ).
2. Track your spending for 30 days
For the next 30 days, record everything you spend on a daily basis. Write down everything and at the end of the 30 days you will have a clear understanding of your spending patterns on groceries, transport, entertainment and everything else.
3. Create a realistic budget
The popular theory of 50/30/20 divides money into three categories and explained that 50% of your income should be put towards your needs (important things such as rent, paying off various bills), 30% towards your wants (such as entertainment, clothing, etc) and 20% of your income should go into savings. Now that you know your spending behavior, you can create a realistic budget that still let you have control over your money.
4. Pay yourself
It might soon weird to think about paying yourself but trust me it is a great thing to do to avoid living above your means. After putting the 50% towards your needs, paying rent, electricity, water, tuition fees and all the important bills, it is time to pay yourself. Paying yourself the 30% of your salary allocated for your want in cash helps you save even better, you stick to your plan when you go out for shopping or drinks or dinner because you have a fixed budget and no credit card to use when you feel like overdoing it.
The 20% dedicated to your savings, try as much as you can to even forget that you have it. Don’t touch it, put it in a separate account if you can.
5. Cut meaningless expenses
Do you really need a brand new car? or change cars every year? Do you really need to rent a two bedroom apartment for yourself as a university student? Do you really need new clothes every single month? Do you really need to go out every weekend and buy drinks for everyone for no reasons?
By this time of the year, people are ready to go broke to have the best Christmas and New Year of their lives forgetting that there is still a life after the festive season. You do not need to go broke to show your loved ones that you appreciate them, no need to go broke to impress your friends and family members that you are living your best life. Budget for whatever you are planning to do this festive season, budget for gifts, food and everything you will need to have a great time this festive season with your loved ones.
Remember: “Write down what you value in life then look closely at your latest financial statement, do your purchases match your values?
6. Get out of debts
Make it a top priority to get out of debts. Pay them on time to avoid being charged penalties for missing your payment. If you have extra money left from the 30% wants or the 50% needs, top that up towards paying off your debts and being debts free quickly. I follow a wonderful finance blogger on Instagram who gives amazing tips on budgeting, saving and getting out of debts. Here is her handle Budget queen
7. Be a smart shopper
A branded sugar and a no name sugar both do the same job. Often we go for the most expensive brand for basics necessities such as cleaning products, sugar, salt basic things that are needed all the time. We buy things we see on adverts because of the promises they appear to have, even when we do not really need them. Try less expensive brand and see if it does a good job cleaning the house. Use coupons, buy sale items, use store loyalty cards and get rewarded for being a loyal customer. See related post Five good financial habits
8. Live on one Income
If you have more than one stream of income, try to live on one only. If one stream of income can cover all your expenses, live on that one only and use the other one to invest or finish paying off your debts quickly. If you get a raise, don’t increase your expenses keep your standards of living and use the extra money for meaningful things.
9. Understand why you are doing this
Why do you want to live below your means? why do you want to start saving? why do you want to be financially free? Understanding the why will help you stick better to a budget and being comfortable saying NO to things that don’t add value to who you are.
Living below my means has been hard at the beginning but with time and good practice, I got used to it. Understanding the why I was doing that helped me stick to my monthly budget and helped me build an extra savings specifically dedicated to sponsor my bucket list.
What are your tips to live below your means?
Till next Sunday