Living within your means can be a broad, elusive statement. Some might assume that since they pay all their bills on time that they’re living within their means.
Others might consider being on target because they have good credit and own a home, have a job and maybe even some retirement money set aside.
Unfortunately, your job isn’t guaranteed, and your current take home pay could be snatched up from under you in a flash. Would you be prepared? Do you have a cushion of savings to live on if some financial burden showed up?
Those who don’t have a rainy day account – emergency fund – of at least one months expenses should start building one immediately.
A recent national survey by the American Savings Education Council and America Saves found that, while about 60 percent of people have savings plans and goals, fewer than half of those save enough to achieve those goals.
People of any earnings status can live paycheck to paycheck, or outside their means.
If you follow these simple tips, you’re living a financially responsible life…
- Downsize if you find yourself living a lifestyle that’s proven to be unsustainable. The adjustments may be painful but the realization and action towards living a more modest lifestyle will reap much more rewards than the stressful constant, nagging feeling of being stretched too thin financially.
- Make regular savings a priority. Arrange your financial affairs so that you have the best shot at creating financial security for you and your family now and in the future. Two main necessary savings…
- Emergency fund (3-6 months of expenses)
- Retirement fund
- Pay off your debt. Begin your debt snowball, as Dave Ramsey puts it and pay off all your outstanding debt. Stop acquiring new debt. Start with the bad debt then work your way through the good debt…
“We buy things we don’t need, with money we don’t have, to impress people we don’t like.” – Mary Ellen Edmunds
Good debt is the money you borrow for something you truly need or that can enhance your financial security or that of your family… like a mortgage to buy a house, a loan to buy a car, borrowing to fund a college education or a business. Bad debt is the debt you take on for things you could do without. Tapping home equity to fund lavish vacations would be an example of bad debt. — Walter Updegrave, Sr. Editor Money Magazine