Are you living within your means? 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. Credit cards, loans, savings, and even emergency funds allow you to buy more things than your income would allow.
How To Fix The Imbalance
Unfortunately, when it comes to spending, that counterbalancing quick fix isn’t quite so simple. So what’s the alternative? After all, nobody wants to feel like they’re on a juice cleanse at a wine and cheese party – all the time. In fact, that feeling of limitation can result in poorer financial decision-making.
The scarcity mindset – the belief that you don’t have enough, has been proven to hamper the ability to make smart financial choices, inducing a kind of all-consuming anxiety that reduces IQ by 13 to 14 points. That drop is comparable to losing a night’s sleep or the effect of alcoholism! In other words, when you feel financially limited, it’s like wearing beer goggles every time you make a money decision.
South Africans are notoriously bad at saving and are big fans of store accounts. Taking on credit on a small scale might not seem like a major financial responsibility, but they add up and that’s how many consumers who apply for debt counselling find themselves in the situation where their debt repayments are more than half of their income. To avoid this happening to you, don’t take on debt unless you absolutely have to. You don’t need the brand new car or bedroom set, a clothing store account or DSTV to have a happy, well-rounded life.
Living within your means is a team effort for families. Parents have to set boundaries for their children and teach them about saving. If you have a spouse or partner, you both have to be willing to stick to a budget and agree on the best ways to spend the money you make. We sometimes feel that people spend their money in a way we wouldn’t, but don’t let this cause friction between you if your partner is sticking to the budget. Rather worry about contributing to a savings account, servicing debt and planning for your kids’ future. It’s more about making sure that your priorities are in line than checking up on each other all the time.
We are living in a consumer culture where the things we have are more important than having a safety net, saving for your kids’ futures or planning for your own retirement. It’s fine to spoil yourself once in a while, but don’t let your lifestyle dictate your quality of life. If you try and buy a better lifestyle all the time, chances are, you will find yourself in way over your head with the first financial speed bump. People who are good at saving know that their quality of life depends on much more than the things they own and the services they have access to.
Strategies To Start Living Within Your Means
- Spread out splurges – A great option for reducing costs without cutting them out entirely is rethinking their frequency. Just as you might transition from daily to a weekly happy hour for the sake of your health, adjusting the timeline of your spending splurges can go a long way in supporting your financial health without resorting to total deprivation. For example, if you indulge in a monthly massage, try changing to a quarterly schedule. Or if you go in for a haircut and colour every 6 weeks, try stretching it to every 8 or 10 weeks.
- Boost 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. You should 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.
- Stop relying on credit cards – Using credit cards is not living within your means. When you plan your budget, completely rule out credit cards as a way to make ends meet. Credit cards are unreliable since your credit card company can decrease your credit limit or even close your credit card at any time without warning.
- Don’t try to keep up with the Joneses or the Hiltons – Resist the pressure to have the same material things as the people around you and even the people on television. You may be able to use credit cards and loans to fake wealth for a short period of time, but you’ll pay for it later, and you’ll end up paying more.
- Save up for purchases instead of putting them on credit – People often use credit cards for large purchases they can’t afford to pay for outright, like a new television. Instead of paying for these purchases on credit, put aside some money each month until you’ve saved up enough to buy it outright. If you can’t afford to save up for the purchase, then you can’t afford to buy it.
- Get an emergency fund – Having savings that are dedicated to emergencies will keep you from resorting to credit cards whenever you have a financial emergency. An emergency fund of three to six months of living expenses is ideal, but starting out with R100 to R200 will help with some of the minor emergencies from time to time.
- Never Pay Retail – Never pay the retail price. Let us rephrase that: Never, ever, ever pay the retail price. There is absolutely no reason to. Shop sales: Yes, that blouse and those heels are totally “now” but they will still be “in” four to six weeks from the time you originally wanted to purchase the item, and they will be anywhere from 30 to 50 percent off. Be patient, wait for the sales and you can get two or three items for the price you were going to pay for one. Second-hand shopping: We truly mourn for those of you who have yet to discover the magical world of garage sales, second-hand stores and Gumtree. You are missing out! There is no better way to save money on clothing for the entire family, not to mention household, craft, outdoor and entertainment items than to buy used. Don’t make that face. Used does not equal gross. You can usually find brand-new or very gently used items at garage sales, second-hand stores and online sales like Gumtree.
- Distinguish Between Wants and Needs – Want and need. In our society, the terms seem interchangeable, but when it comes to saving money and keeping a budget, they are polar opposites. Your basic needs are food, water and shelter. You need these things to survive. But, let’s take an even closer look at these basic needs. Just because you need food, doesn’t mean you should go out to eat every night to obtain sustenance. You can purchase food at a grocery store or farmer’s market for much less. Dine in! Before you purchase anything, large or small, stop for a few seconds and ask yourself “Do I really need this or do I just want it and can it wait for later?”
- Pay Off Your Debts – Mounting debt can haunt you. There is hope, however, and you can get out of debt. Just as you set aside money in your budget for savings, begin setting aside a small sum each month towards paying off your debt. Don’t use that money for anything else besides this purpose. Slowly but surely, you will pay off that debt. If you have extra money at the end of the month in your budget, we recommend putting all of it towards paying down your debts.
- Plant a Garden – There are few things more satisfying than planting, cultivating and harvesting a garden. Youdon’t have to live on a large chunk of land to plant a garden. If you live in a high-rise or an apartment building, you can plant small-crop items such as tomatoes, onions, lettuce and carrots in a planter box on your terrace. If you live in a home with a small yard, you can convert a flowerbed into a planting area.
- Be Healthy – Nothing can send you into a downward financial spiral like medical bills, planned or unplanned. Maintaining a healthy body through healthy living is so important. Make sure that, if you have insurance, you go to all of your yearly checkups that, for the most part, are covered 100 percent by your provider. Do everything in your power to be healthy and you will save hundreds (if not thousands) of Rands in medical bills every year.
- Pay With Cash or Debit Card – If you have credit card debt, or know that you have little self-control when it comes to shopping with a credit card, then we recommend that you pay for everything with cash or a debit card. You can still get the items you need, but you will not be accruing interest on your purchases, and once the cash is gone, it’s gone. Depending on who you bank with, you can go into your personal settings and set limits for yourself. This will make you accountable for your spending and remind you of how much you have spent and how much you have left in your account.
- Do It Yourself – DIY has become an acronym for the brave at heart who take on and complete projects themselves. If you have the skill set, willingness to learn and most importantly patience, you can complete almost any project by yourself and save money doing it. Gardening, for example, can be counted as a DIY project. You will be able to save on fresh produce during the winter months if you can your harvest. By completing projects by yourself, you will save money. You can paint the house, sew curtains, refinish furniture that you picked up for a steal at a yard sale, build a fence, re-work and refashion clothing, the list of projects really is endless. Sit down right now and begin the first step, budgeting. From there, you will know exactly how much you make, how much you need to save and how much you can then spend. Money is tight, we understand, but by spending a few hours a week building your budget, clipping coupons or tackling projects yourself, you will spend less and save more, we guarantee it.
If your financial situation feels out of control or your debt feels like it is too much to handle contact us for a free consultation. Debt Counselling can save you up to 60% on your debt repayments.