You’ve heard the term “live within your means” before you’re sure. Many people try to give advice to others on how to get ahead in the world and one of the first things they tell you is to live within your means. This is the worst advice anyone can give to someone who wants to know how to get ahead financially. The only way to get ahead financially is by living below your means. There are steps you can take to reduce your daily expenses, as well as your monthly living expenses, so that you can start paying off your debts and start saving for the future. Knowing how to budget is a very important part of getting your finances in order. The next thing you will need to do is set a clearly defined set of goals for yourself. When setting a budget and defining your goals, you will need to come up with a fallow plan so that you can achieve them successfully. You will need to be prepared for a dramatic lifestyle change, but making a lifestyle change by choice is better than being forced to do it later.
If you have racked up substantial credit card debt, you are living beyond your means right now, unless some kind of medical emergency has arisen and that is the reason for the debt. Either way, you need to start dealing with your debt. Debt is something you don’t want to keep because you end up paying a lot more than you borrowed when you pay it off. If you don’t have a huge credit card bill and you don’t have five years to pay for a car you’re probably living on your means right now. That’s good because the lifestyle changes you are about to experience will not be as dramatic as the ones you live beyond your means. No matter what category you fall into, don’t worry, there is light at the end of the tunnel as long as you are willing to tighten your belt and start being more disciplined in your spending.
The first thing to do if you want to get out of debt or start a savings plan is learn how to budget. To budget, you don’t need to be an Excel expert, although it helps. All you need to do is take a month and record everything you spend your money on. It sounds a bit slow, but if you are like most people and use a debit card, you can always go to your bank’s website and get your transaction history and copy it from there. It’s best to do this every day so you don’t forget what the transactions were for, but once a week may be enough. At the end of the month, you should have a list of everything you spent money on with your debit card. Any purchases you made with cash taken from an ATM will need to obtain a receipt and save it. After accounting for what you spend on ATM withdrawals and purchases you made with your debit card, it’s time to add the checks you wrote for things like rent, gas, electricity, and your car payment. .
When you have it all written down on paper or on the computer, it’s time to start categorizing them. If you are using a program like Quicken, Microsoft Money, excel, or an open office spreadsheet, you can find budget templates that you can set up yourself. If you don’t have a budgeting program, you will have to create categories yourself. Some categories you can use are: entertainment, food, housing, utilities, transportation, child care, investments, savings, debt repayment, and education. Take each item you spent money on and put it in one of the categories you choose to use along with its cost. Once you’re done, total how much money was spent in each category and then how much was spent in total, you will have your first full monthly expense report. Now is the time to find areas where you can cut your expenses. Go through your list and find areas where you are spending money that you can cut back. Make a new list with the same categories, but instead of putting everything you spent money on below them, just put the things you hope you need to spend money on. This is your first budget and it is what you will leave fallow for the next month. At the bottom of the paper, next to where you put the total money you expect to spend, indicate how much money you expect to earn that month. You will need your expected expenses to be less than what you expect to earn as much as possible. Now you have to plan ways to fit your budget.
If you eliminate things like eating out and buying coffee while you’re at work, you’ll see that you can save a lot more than you thought. Starting to pack your own lunch and coffee in a thermos to work will definitely save you a lot of money. If you don’t go out with friends every weekend, you can reduce your expenses. You don’t have to give up your social life entirely, but you can slow it down a bit. Maybe instead of going to a bar on Friday night, invite your friends to watch a game on Saturday or cook some hot dogs or burgers on the grill. Just have everyone bring something so the cost is spread across everyone, like when they go to bars. No matter how many times you go out and hang out with friends, now you need to cut that by 50 to 75 percent.
You need to find a place to live that is more affordable than where you are right now. If you can’t find anything cheaper or if you currently live in a house that you have a mortgage on, you may want to think about getting a roommate. By having a roommate, you can cut your monthly housing payment in half along with your utility bills. If you’re in a one-bedroom, you might be able to find a two-bedroom that costs just a little more per month, but less if you have a roommate to share the costs. When choosing a roommate, you will need to make sure it is someone who is financially responsible and willing to sign the lease with you. If you currently live in a house that you have a mortgage on, you may want to rent one of the rooms that you have to someone. This can help you with your house payments a little bit each month. The money you save when you do one of these things is to pay off debt or put into a savings account. You are not trying to reduce your housing expenses to have more money to spend, you are trying to start paying off your debts or building savings.
The next thing you want to see is the cost of your vehicle. If you are paying for a vehicle for five years, you cannot afford the vehicle you have. Everyone likes to have a good car, but if you are in debt or cannot accumulate savings, you should get a cheaper car. If you can’t afford a vehicle in two to three years, you should look for a cheaper vehicle. You may want to consider buying a used vehicle rather than a new one. As long as you don’t live in the snow belt, where you need all-wheel drive and don’t rely on hauling things with your vehicle for work purposes, you don’t need a new car that costs more than $ 15,000. You can find a decent used car for around $ 5000 and that’s the route I suggest you take. The biggest problem people have when buying a used car is that they can’t raise money for the down payment, so they go for a new car because they can finance everything. So if you decide to go the used car route, you’ll want to cut some costs in other areas first so you can save a down payment. If you currently have a new car you still owe a lot of money for it, go to the dealer you bought it from and see if you can lower your payments by swapping it out for a cheaper vehicle or go to another dealer and see what they can. made for you. Every time you agree to make payments for four or five years on something, you are pinning money that you haven’t earned for quite some time.
By not being the one trying to keep up with the neighbor, you will probably end up in better shape than them later down the road. If you have a lot of debts, it will take time to resolve them. A budget is not something that will fix your financial situation in a month or even a year. You will have to keep using it long term if you want it to work. You have to do smart things like if you pay long distance for phone calls, it’s time you got a different phone provider because most places no longer charge long distance for phone calls within the US And sometimes, even in Canada. If you’re reading this article because you need to get your finances in order, you don’t need to spend money on a new cell phone or computer. A cell phone comes free with a service plan these days and there is no need to pay for Internet access on your cell phone if you have a computer and Internet access at home. If Internet access comes free with the service plan, great, but if not, you don’t need it. A computer is not something you need to update every year. As long as you can surf the net and run the programs you need on your computer, that’s fine. The only thing I recommend against using is the antivirus software on your computer. You always want up-to-date internet security on your computer at all times.
By paying off your debt and setting aside a small amount in savings to create an emergency fund, you are on your way to financial stability. Typically, you want an emergency fund to equal roughly three months’ salary to have money in case something like medical expenses arises or you get laid off. Once you have your debt under control and under control, I mean you have nothing on your credit cards that cannot be paid off in a month and you are driving a car that will have paid off in three years or less. With your credit cards paid off and your emergency fund built up, it’s time to start investing your money. This can be with certificates of deposit, mutual funds, savings accounts, and stocks, whatever else you know. Don’t forget to contribute to your IRA each year because you can take deductions from your taxes. The key is to get to the point where you can start saving money. Never invest more than you are willing to lose in stocks or mutual funds, and never invest in something you don’t understand. At the very least, open a savings account at an FDIC-insured bank. It may take you a few years to get everything under control, but as long as you are fallow with your plan, you can achieve it. All you have to do is stay disciplined and don’t stray too far from your budget.