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What It Really Means to Live Within Your Means

Cutting back may not sound like fun, but spending less money than you have can lead to a pretty prosperous future. Instead of struggling to meet your basic financial obligations or letting your spending habits change with every dollar you earn, it can be a good idea to consider living below — or at least within — your means. This means spending less than you earn. You can have a comfortable life while still being fiscally responsible. Check out some tips below to help you avoid living an inflated lifestyle and save more for your future.

Run the Numbers

Your first step in evaluating your lifestyle is doing some math. Calculate your take-home pay (an income tax calculator can help). Then, take a look at major expenses that you can’t afford to miss — like mortgage, student loan or credit card debt repayment. Next, consider your retirement savings, because it’s important to set yourself up for a bright financial future. Once all the long-term costs are accounted for, then you can think about your food, transportation and living costs. It’s a good idea to wait to add anything “extra,” from new clothes to nights out, only after all these other expenses are subtracted from your after-tax income.

This is also a good time to check your credit score — you can see two of your credit scores for free on A good credit score will give you access to lower interest interest rates when you do have to borrow, and you generally need good credit to get cash-back and other types of rewards credit cards that can help you get maximum value for your spending.

Challenge Everything

From recurring bills and monthly statements to one-off purchases and splurges, it’s important to think about whether you are spending to impress others or measuring your wealth in material objects. Don’t take prices at face value. Research before you buy and look for deals where you can. Most important, be sure every dollar you spend is going toward something that you really need or value. Choosing to live on less can help you shed the shackles of consumer culture and allow you to use your funds on what really matters to you.

Make the Change

If you find you are constantly coming up short on funds and relying on credit cards or loans to make up the difference, this means you are living beyond your means. This likely means you need to make some (possibly major) changes to your spending and lifestyle. A drastic change in lifestyle may not be for everyone, but looking over and streamlining your budget can help you get an idea of where you stand financially and help you set goals for where you want to be. Allow yourself to focus on paying down debt, building an emergency fund, and saving money for the future instead of spending mindlessly. Try to use what you have, take on some DIY projects, save your raises, spread out your splurges, and avoid splurging or adding new expenses every time your paycheck changes. In this case, making a change is really trying to stay the same.

Managing your money wisely means your money does not manage you. Living below your means can help you build wealth, reduce stress, create options and find what is really important to you.

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