Wealth is not simply your income, it’s also the money you accumulate through savings and investments. When you create a financial budget, you can grow your wealth by living below your means.
Most people believe that wealth is measured by the amount of money you earn. Although that may be a factor, the more accurate gauge of wealth is how much you have actually accumulated. Savings, investments or other items of marketable value all contribute to your wealth. When you create a financial budget, you can learn to live below your means and grow your wealth.
Below Your Means Is Best
Today, when living paycheck to paycheck is the norm, wealth is something that eludes most of us. One of the biggest obstacles to obtaining wealth is living well above our means.
Living below your means is the fastest path to financial freedom. While it may be a challenging transition, the benefits will be well worth the sacrifice it takes to get there. Before you know it, spending less than you earn will become second nature. You’ll wonder why financial stability took so long to find.
Steps to Create a Below-your-means Budget
Here are steps to get you started on your journey to financial freedom and learning to live below your means:
- Find Your Why. With every goal, there must be a motivation behind it. What’s the reason you want to be debt-free? Why do you want to build wealth? Be sure to write down your whys and refer to them often.
- Determine Your Debt. It’s time to add up your total debt and assess your current financial situation. Make a list of all your monthly expenses so that you can clearly see what bills need to be paid.
- Track Other Spending. How much do you spend on groceries, dry cleaning or entertainment? For the next 30 days, record all of your expenditures so that you have an accurate accounting of your daily spending.
- Create a Budget. With your “why” in mind and your debt and spending numbers in clear view, you can create a realistic budget. This allows you to set monthly spending limits for things like groceries, dry cleaning, dinner out, and other fluid expenditures.
- Eliminate. Cutting back is never fun. But, when it’s necessary, you can cut cable TV and phone plans, expensive groceries, gym memberships, entertainment, and new clothing. Evaluate where you can cut costs.
- Economize. Once you eliminate what you don’t need, look at your necessary spending. Where can you save money on what you must spend? Look at each category in your budget and determine one way in which you can lower the cost. Change providers? Choose different brands to purchase? Negotiate a lower price? Downgrade to a lower plan?
- Save It or Use It Wisely. Once you’ve managed to save some of that extra money, there are many ways to use it:
- Pay down some debt.
- Put it into a savings account.
- Invest it in a retirement account.
Just be sure to use it to further your financial security, especially after the sacrifice it took you to save it.
Benefits of Living below Your Means
Soon the burden of all the work will be overshadowed by the many benefits of living below your means:
- Less stress
- Fewer financial emergencies
- More quality family time
- A sense of freedom
- Never feeling trapped in a job that you dread.
You’ll become a natural saver and be able to make wise decisions when it comes to your financial future.
Living below your means is a choice, and it’s a smart one. Those who decide to do it sooner rather than later will live happier and financially healthier lives, regardless of their income. Set some time aside and gain control of your financial future. Start by creating a financial budget that helps you live below your means.