Living Beneath Your Means

April 28, 2009

Close your ears to what advertisers would have you believe, you don’t have to spend every nickel of your paycheck to have a good life. Spending money on things won’t make you richer, thinner, sexier, more beautiful, or more popular. It’ll just leave you poorer — and no closer to your real long-term financial goals, which may include buying a house, taking a dream vacation, or even retiring early.

So try this: Regardless of what your income is now, try living just beneath your means. If you earn $30,000 a year, pretend you earn $28,000. If you earn $50,000, live as if you earned $45,000. If you earn $100,000, try to get by on $85,000. As your income increases over time, boost your standard of living only enough to feel the reward, but not enough to spend all of the additional income. Keep doing this throughout your career and the gap between what you earn and what you spend will gradually widen. Your savings will snowball, and you’ll be well on your way to achieving your financial goals.

Pay special attention to the money you spend out of sheer habit. You may realize that many of these expenditures provide little satisfaction and can easily be cut out. Here are some ways to live beneath your means and still have a good life:

  • When you eat out, make it count. Fast food and quick restaurant meals can consume a large portion of your paycheck, and often the food’s not even that good. If you eat out a lot, consider changing your eating habits to include fresh, wholesome food prepared at home. Save restaurant meals for special occasions. Then choose a restaurant you really like (not necessarily an expensive one), and savor both the food and the ambience. One great restaurant meal can be worth 10 mediocre ones.
  • Take creative vacations. Think of vacations as having three components: getting there; staying there; and doing stuff. You can save transportation costs by not going very far, or by driving instead of flying. You can save hotel expenses by camping or staying with friends. You can save on recreational activities by doing things that don’t cost money, such as hiking, swimming, or getting lost in a good book. By saving money in one area, you can splurge on another. Or by saving in all three areas, you can put the difference into a special vacation fund for your dream trip a few years from now.
  • Rethink your indulgences. If you have a particular hobby or interest that uses up a good part of your paycheck, periodically reevaluate the amount of pleasure you are getting from it. If it no longer provides as much satisfaction as it used to, find a new interest, preferably one that doesn’t cost as much. If you decide to stick with the same indulgence, find ways to cut back: go for biweekly facials instead of weekly ones; split season tickets with a friend; use the library more instead of buying books, videos, or CDs.
  • Get organized. By planning ahead, you can avoid impulse purchases and find the best bargains. You can compare prices and watch for sales, or even shop at garage sales and check the classified ads for used items. Do this with everything you buy and watch your savings grow!
  • You can probably come up with a dozen more ways to get a handle on your cash flow. That’s the simple secret of financial freedom — learning to control your spending, rather than having it control you.

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