Living within your means – On the Money with Jarryd Neves
Whether you realise it or not, your personal finances play a big role in your mental and physical health. I'm not approaching this from the angle of money buying happiness, but rather the stress and anxiety that accompanies poor money management and financial decisions.
Living within your means seems like a rather easy thing to do, but you'd be surprised at how easy it is to spend more than you make. Quite simply, the phrase refers to spending less or the same as you make. This isn't as easy as it sounds though – at least for some people.
It doesn't help that overspending has been made so easy. Credit cards – and how readily available they are – overdrafts and micro loans essentially means that money is readily available for those that need (or want) it at a moment's notice. While swiping that credit card may be gratifying, this reckless spending does eventually catch up to you.
Don't think that you need to make debt in order to 'live about your means', either. A part of having a healthy financial life is saving, investing and having an emergency fund. Blowing through that to fund a lavish lifestyle is, in essence, robbing your future self of stability and stability. If you have an issue with overspending (or financing a lifestyle you simply cannot afford), here are some tips to avoid it and get your personal finance back on track.
It's important to know how much you make. Yes, you're aware of how much money is deposited into your account at the end of the month – but what about your expenses? Knowing what you have left to spend – after you've paid your bills and made essential purchases – is key. Spending what you earn is futile if you haven't calculated living expenses.
A part of preventing overspend is to budget. I've touched on budgeting quite extensively over the past few weeks – so I won't go into too much details now – but it's essential that you create a budget. It didn't work for you? Continue to tweak and alter it. Make sure that you have your rent, car payment and utilities paid first. If there's anything left over, use that to save and/or invest. The rest can be your 'fun' money – i.e, cash that you can spend guilt-free. Some people subscribe to the 50/30/20 principle. This budget allocates 50% of your income to things like a bond, rent and groceries. 30% is allocated to spending and fun and the last 20% to debt and investing. This, however, is not ideal for people with higher debt levels.
Also easier said than done, but try and boost your monthly (or weekly income). Even if it means taking on a second job or side hustle, bringing in extra cash will give you more to spend – without relying on credit cards or loans. What's more, with your time being occupied with supplementary work, you'd be less inclined to go out and spend money.
Understand why you're overspending – is it a lack or self-control, poor budgeting or a matter of being perceived as wealthier than you actually are? Budgeting can be rectified, over time. If you're struggling to stick to a budget, consider asking a friend or family member who's great with money to help you out. Self-control issues – i.e people addicted to shopping – need to find help. While it may sound funny (people being addicted to shopping), it's a real thing and there are organisations out there who can help.
The same goes for wanting to be perceived as someone with a glamorous lifestyle. Social media and peer pressure has made it even harder for young people to control their spending. We're all human, after all – and want nice things. While some are more fortunate than others, that doesn't mean you need to incur debt to buy material things. Faking wealth may work for you now – but you have to pay it back later. Keeping up with the Joneses never ends well.
So, what to do? Well, it involves time and plenty of patience but saving for things often makes the purchase that much more rewarding. Yes, you may have to wait much longer, but this also has its benefits. The time needed to save will give you time to reflect on whether you really want – or need – the item in question. If you do decide that said item is for you, you're able to purchase it debt-free.
This may all seem very stressful – especially if you live beyond your means – but getting your personal finances in order is the best thing that you can do for yourself. It will give you the space to start saving and investing for your future. Remember, the people you're trying to impress won't be there when you're struggling in your retirement.
Have a question about share investing? Write to me at jarryd@biznews.com.
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