Live below your means! You may have heard of this phrase before and wonder why you should? Especially when you only live once.
In case you are still wondering about the importance of living you mean, continue reading on.
Living below your means Lay’s in the foundation of financial Independence, if you don’t do this consistently – you may not achieve financial freedom.
Why should you live below your means?
While it’s true that you only live once, if you do it properly- living once is good enough. As a young student, you may not realize that your priorities will change over time.
Your thoughts about life will change over time, most of us live our lives carefree when we have no one depending on us and so and so on. However, once you start to think that you need a lifetime partner and you get married, and then start a family subsequently.
Below are the different points to take note of regarding living below your means.
Save and invest for the short term needs
Like it or not, you are going to have more financial needs in the future, even if you wish to continue your current lifestyle without changing a tiny bit – you will eventually need more money due to inflation.
Buying a house
If you wish to settle down at a place of your choice or got tired of entertaining landlords one after another or even realize that the property prices and rents are going to go higher – these thoughts will eventually land you on the option to own your residence.
While each of us comes to this conclusion at different stages of life, this is inevitably going to be one of the big-ticket purchases of our lifetime.
How much you want to spend on your place of residence depends on your preference, it sure does cost a lot in most of the developed countries. Hence, it’s worthwhile starting to think about how you are going to have the necessary funds for this goal.
Wedding
If you have already found your soulmate and someday you both wish to be married, this can become a costly life goal for some of you.
Unfortunately, there is no low-cost loan that helps you to cover these wedding expenses. Regardless of what type of wedding you are planning, it will take up a fair amount out of your wallet.
Hence, it’s worth considering and planning for these expenses in advance.
Having babies
If you are at the stage of welcoming your little ones to the world or planning to expand your family sometime in the future, this will become one of the short-term expenses.
In developed countries, it does cost quite a lot for the delivery expenses as well as the different routine doctor visits. Depending on where you are living in the globe, there are different blogs and YouTube videos that explain the breakdown of the different maternity expenses.
Other short term goals
The above listed few are only some of the bigger expenses you may experience first hand in the few months or years to come, there can be other expenses like owning a motorcycle or car, need to replace your electric gadgets like mobile devices, etc.
Long term financial goals
Similar to the short-term goals mentioned above, you can also have goals that are on a medium to long-term basis.
Achieve financial freedom
Achieving financial freedom can be a mid to long-term goal for some of you. If so, this is one of the reasons for you to continue to live below your means. If you are wondering what is financial freedom or financial independence? check out the post I have written previously
What is Financial Independence/Financial freedom?
Children’s education
While saving up for pregnancy and delivery is a short-term need, saving up for the children’s education can be a longer-term need. While some countries subsidize the citizens’ education, it may not be true for all countries. Especially in developing countries.
If your children wish to pursue education in a different country, it also will add cost to the education element.
Encourage your children to study hard and get scholarships and at the same time, save and invest consistently up to their birth, to support them with their big-ticket expenses.
Comfortable retirement
One of the best things to do for your kids is to have a proper retirement plan for yourself, this way you will not require them to financially support you when your children grow up and start their hustle to make ends meet and provide for their dependents.
You can be the breaker of sandwiching younger generations by uplifting the burden of your retirement and future expenses from your children’s shoulders.
Leaving a legacy
If you plan well, you can leave a legacy for your future generations by building wealth that may last longer. This is totally up to you to decide if you want to inherit a significant sum for your children and grandchildren to ease up on some of their future expenses. Like having a property that can be inherited. It can be in the form of money too.
Since money, as it is, will lose its value over time, I would suggest it to be in the form of some investments.
Help the needy
If you are financially well off, you can give back some to society, it can be through any form that you like. Some examples I can add are: Contributing to charity, Financial aid for poor children, Helping with poor and needy medical needs, etc.
These are only a few options that are mentioned, you can support any cause that you think is right.
How to spot living above your means
Now that you got some idea of what living below you means – mean, let’s see how well you are doing by taking a pulse check below.
Excessive credit card debts
If you are constantly having too much credit card debt, this can be a sign that you are living above your means.
Some of you may use credit cards like there is no tomorrow and go on shopping sprees for things you may need and may not need. An item that is on sale doesn’t always mean that you need to buy that.
If you are constantly having to wait for the next month’s salary to pay the credit card bill in full or on partial. This is an alert that you need to hit the brake and get your spending habits checked.
Not saving at least 20% income
The next pulse check to perform is by checking the rate of your savings, if you are not saving at least 20% of your income, it is another sign that you are living above your means like there is no tomorrow.
It’s understandable to have Low to no savings at your very young ages, like when you are a student or just starting a career.
Once you have spent a few years working and if you are still not able to save at least 20% of your salary, take a deeper look into your spending habits and have some checks and balances to not shoot at your foot in the future.
Check out these tips on how to increase your income and reduce the spending.
Follow These Steps To Control Your Expenses
How To Increase Income/Earnings And Achieve Financial Freedom?
Having no emergency savings
Please pay close attention to what I’m about to say.
If you are not familiar with the concept of emergency savings and you have no savings of any sort, you might be in dangerous territory.
Please start having the habit of saving up money that is required to pay for your monthly mandatory expenses like grocery, food, insurance, etc… this can ignore payments like gym membership and other discretionary expenses like your planned vacation.
This emergency saving is to help you with any financial need arising from losing your job/medical emergency that puts you in a position where you or your loved ones are unable to work and earn money for a living.
This can be minimally your 3 months of mandatory expenses, this will give you some time to tide over the short-term financial crunch. 3 months Maybe enough for you to find another job, if you are well or even to figure out to take up some alternative job in the short term.
Kindly also remember to keep this in an account that is easily accessible, but different from your daily expense account to ensure that you don’t accidentally use this fund. Remember not to invest this in any risky assets or investment vehicles that cannot be redeemed in full in at least 2-3 days.
Conclusion
I hope you understand the reasons for living below your means and how to spot if you are living above your means. Kindly share this post with your loved ones if you think these thoughts may help them in their financial journey. You can also share these on social media to get the message out to more people.
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