Living within your means is a basic yet challenging rule that should apply to nearly everyone — whether you’re making six-figures or working minimum wage.
Put simply, it means you spend less than what you earn each month. If you follow this principle, you may have enough money to cover all your expenses. In the best-case scenario, you would even have some money to put aside in a rainy-day fund.
On paper, it may seem like a piece of cake. But it’s not always easy to put into practice.
According to a 2017 national survey by CareerBuilder, nearly 80 percent of Americans live paycheck to paycheck, and according to a 2018 GOBankingRates survey, roughly one-third of the country has absolutely nothing set aside for an emergency.
Online loans from an online loans direct lender may act as a backup if an emergency strikes when your savings are low. But loans can’t be an ongoing solution to long-term financial issues.
If you’re living paycheck to paycheck, relying on loans often, or spending beyond your means every month — keep scrolling. Below you’ll find a no-fuss guide to living within your means and saving more of your paycheck.
If you want to be successful, you need to find a reason that makes you want to save.
Why? Well, we’ll be honest. Saving isn’t always easy. It may come with a lot of sacrifices, as you may forgo your usual treats to free up cash for your savings account.
A goal gives you a reason why you sacrifice some of the fun things in your budget. It acts as a reminder that all your hard work will pay off as long as you stick to the plan.
Remembering the perks of delayed gratification is just one way you can focus on saving.
The key to smart goals is clarity. Well-defined goals give you clear instructions on how to boost your savings account, so you can keep your road trips on budget, buy more clothes, or build an emergency fund.
Smart goals can even help you make a plan if you need to find a way to pay back a personal loan you’ve taken out to cover an unexpected emergency expense, such as an emergency medical bill or unexpected major repair.
This financial tool is one part of the road map to successful money management. It outlines the spending limits you’ll have to meet if you expect to have leftover cash.
Setting these types of limits can be a challenge, especially if you’ve never followed a budget. However, the more you work with a budget, the easier it may become to stick to the parameters you’ve set.
It also helps when you study up on the best ways to budget. Below, we’ll go over some of the common things you’ll want to include and how to calculate them.
Rent is one of the biggest living expenses many people pay every month. It’s might be true for you, too — whether you’re living in a condo in Los Angeles or a side-split in Boise.
Wherever you call home, many experts say you should spend roughly 30 percent of your net income on housing costs. With roughly thirty percent of your earnings tied up this way, you’ll still have most of your income to cover other essentials and expenses.
Finding out whether your current rent meets this target is simple. Let’s say your net salary is $35,000 a year. The calculation would look like this:
$35,000 x 0.30 = $10,500
By this math, you should spend $10,500 per year, or $875 per month.
Try it out with your own net income to see if you meet this target.
How did you do? Don’t panic if you go over it by a little bit. This rule has some wiggle room depending on where you live. Geography plays a huge part in whether 30 percent is realistic for the rental and housing markets in your area.
After all, you may find it easier to follow the rule if you live in Boise than if you live in L.A. Los Angeles has one of the highest costs of living in the country, so rent may naturally take up more of your income.
If you live in an expensive area, you may have to spend more than 30 percent — and that might be okay. It’s possible to spend 40, 45, or even 50 percent of your income on housing costs as long as you spend less in other areas of your budget.
But if your housing costs make it difficult to cover other expenses and you’re tempted to use online loans to cover your rent or bills, they’re taking up too much of your budget. Online loans are meant for temporary emergency hiccups only, like when you’re stuck paying an unexpected emergency expense, like an unexpected medical bill during a tight month. They’re not meant to help you cover regular expenses like rent.
Food can be a tricky item in your budget. Unlike rent — which remains the same each month — food is a variable expense. That means how much you spend on it may fluctuate greatly from month to month.
Between having dinner out with friends and picking up prepared foods during the day, these costs add up. If you aren’t careful, you might not have any extra cash leftover if an emergency strikes.
Looking back at your eating habits, how would you describe your food budget? Do you tend to stick to the basics? Or do you make a point of filling your fridge and pantry with gourmet ingredients?
The answer is important. Your lifestyle dictates how much you end up spending on food.
The USDA developed a simple rubric for the cost of food. It breaks down spending into four major budgets and sets spending limits for each, including:
In March of 2019, a thrifty food plan would cost a family of four with kids aged 6-8 and 9-11 roughly $650 a month. A liberal plan for the same family would cost approximately $1,300.
If you’re finding it hard to stick with a thrifty budget, a meal plan is a helpful tool. It’s a way of organizing your weekly meals, so you can make delicious and nutritious food that fits your budget. And with every meal accounted for, you may be less likely to fill gaps with expensive food on the go.
Previously on the blog, we shined a spotlight on the percentage budget. This budgeting method breaks down your major spending into percentages.
There are three common configurations that assign a different percentage to each expense. But they all have one thing in common: they all leave room for savings, with two of them designed to help you to save as much as 20 percent of your net income.
Twenty percent is a good number to aim for when it comes to how much of your income you should aim to save each month. This may give you enough cash to put towards an emergency and save for life events, special occasions, and big purchases.
Don’t be discouraged if your spending habits now don’t align with the targets set out above. You can get on track if you’re willing to make some changes.
The following daily, weekly, and monthly changes will help you move money away from unnecessary expenses, so you have more of it to spend on the important things. And best of all, they’re easy enough for you to follow this advice even if you’re in the process of paying back installment loans or other loans.
It also makes sense to spend some time looking through your budget to determine if there are some services you don’t need. While you may not be able to cancel auto insurance, you may not need four different streaming services to watch TV and movies. You may want to research your options and pick one that you’re best suited to.
Impulsive spending is a scourge to good budgets everywhere. It can undo all the hours of hard work you put into your budget in the time it takes you to swipe your card.
Whether shopping online or in-store, you don’t always think about the real impact of a purchase. All you’re focused on is the immediate thrill of shopping.
In the heat of the moment, the impulsive version of you may make some bad decisions — like convincing yourself you should upgrade your phone and subsequently add on to your monthly cell phone bill.
Timing is everything. Too little of it, and you might accidentally splurge on something you don’t need. But give yourself enough of it, and you’ll have a greater chance at reining in impulsive spending.
The 30-Day Rule may be the jolt to the system you need to snap out of a shopping haze. All it takes is time — 30 days of it, to be precise.
So, the next time you see something that you just have to have, don’t buy it. Put it back on the shelf or remove it from your online shopping cart. Then spend the next 30 days thinking about why you want it.
Thirty days is likely enough time to look into whether something like the iPhone XS Max will improve your life in ways that are worth the extra cost. You’ll also be able to check if that cost is something you can afford.
Before you commit to any purchase, check back with your budget. It’s there to help you determine if a splurge item is within your means or so far out of them, it may as well be in another universe.
If you have to stretch your budget too thin to cover the expense, then it’s not worth it. If you’re in the process of paying back loans, then you may not want to buy it either.
If it’s something you can afford and you’re still convinced you need it, the 30-Day Rule comes with another advantage. You might not be stuck paying the first price you saw. You have the chance to search out deals and use coupons and rebate apps to potentially save.
Most of us aren’t used to stepping on the brakes when it comes to shopping. In the world of online shopping and two-day delivery windows, we don’t have to wait long for may things. If we see something we want, we tend to get it. So, it’s understandable that the 30-Day Rule can feel like you’re moving at a snail’s pace.
But it’s not just a slow way to shop. It’s a methodical approach to your finances. Banishing impulsive spending by really thinking about your needs and wants helps you understand your financial limits.
The same goes for setting goals, following a budget, and making healthy changes to your habits. These strategies help you ensure that you have savings to use, instead of short term loans online the next time an unexpected expense or repair comes your way.
So, there’s no harm in taking it slow. In fact, you only stand to benefit from a slow and steady money management style. You’ll gain a better appreciation for your finances. And more importantly, you’ll learn how to save more and live within your means.