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Living Well Under Budget
Contrary to popular opinion, the key to financial freedom isn't solely based on the amount of money you bring into the household each month. It's about learning how to manage your money and prioritise your spending. This is also known as living beneath your means.
If you're struggling to stay on budget, pay off debt, build savings or create an emergency fund, then you need to stop and look at how you're living.
If you want to change your financial outcome, you need to make the changes to your attitude, spending and saving to allow this to happen.
That doesn't mean you immediately need to live on beans and rice, never go out or move to a tiny house. It just means you need to think about spending and change the things that are costing you.
The first thing to change is your attitude towards your life. If you're constantly in a competition with your neighbours, co-workers or friends, you're never going to stop spending. In the back of your mind, you'll always try to "beat" them by having the newest car, biggest house, most expensive clothing, and more.
Look at what you have. Do you have a roof over your head? Clothes on your back? Shoes on your feet? A car in the driveway? Food in the fridge? A way of making an income? Friends? Family? Right away you're better off than a lot of other Australians.
Think about how blessed you are to have these things, and straight away you'll feel better, and the need to have the same or better than your associates will be gone.
And when that competitiveness goes, you can effectively trim the fat from your budget.
I've said for years that we ditched the stuff that wasn't important to us, so we'd have the cash to enjoy the things that are.
And that's what you're doing: ditching the unimportant stuff. It's not hard, you just choose the things that really matter to you and ignore the rest.
Work with what you have. There's no need to upgrade your car if the one you're driving now gets you from point A to point B. If your current home isn't to your liking, make some updates or redecorate - it's a far less expensive fix than purchasing an extravagant home that you won't be able to enjoy because you spend all your time working to pay for it.
The next thing to do is trim your grocery budget. You just need to be conscious of your purchases. It's possible to feed a family of four for under $10 a meal - with a high quality meal to boot!
And lastly, make saving a priority. Saving isn't optional. It's necessary for financial emergencies - and they always come up in some form or another. Treat it as any other bill each month. Saving needs to be a category in your Spending Plan - do it now if it's not already there!
If you'd like, break it up into pay periods. In order to save $800 per month in a 2-income household, each partner would have to set aside $100 per week. A $400 goal would be just $50 per week. When a savings goal is broken into manageable pieces, it's a far less daunting figure.
When you're unable to meet your saving goals, either find a way to make more money, or spend less money each month. If you're able to trim the fat from your monthly expenses, there will always be a way to meet your savings goals.
And lastly, but also important, is to budget your "fun money" as well. When you budget a set amount for unnecessary shopping trips and entertainment, you can't shop until you drop. When the money runs out, you're done. At the same time you don't need to feel guilty if you buy that magazine or have a coffee on the way to work.
And that's important. Budgeting and saving isn't a punishment, it's a lifestyle plan to get you to your financial goals faster.
Your entire life doesn't need to change in order to live below your means. It's all about minimizing your expenses where possible and refusing the urge to live larger - even if you have the means to do so.
If you're struggling to stay on budget, pay off debt, build savings or create an emergency fund, then you need to stop and look at how you're living.
If you want to change your financial outcome, you need to make the changes to your attitude, spending and saving to allow this to happen.
That doesn't mean you immediately need to live on beans and rice, never go out or move to a tiny house. It just means you need to think about spending and change the things that are costing you.
The first thing to change is your attitude towards your life. If you're constantly in a competition with your neighbours, co-workers or friends, you're never going to stop spending. In the back of your mind, you'll always try to "beat" them by having the newest car, biggest house, most expensive clothing, and more.
Look at what you have. Do you have a roof over your head? Clothes on your back? Shoes on your feet? A car in the driveway? Food in the fridge? A way of making an income? Friends? Family? Right away you're better off than a lot of other Australians.
Think about how blessed you are to have these things, and straight away you'll feel better, and the need to have the same or better than your associates will be gone.
And when that competitiveness goes, you can effectively trim the fat from your budget.
I've said for years that we ditched the stuff that wasn't important to us, so we'd have the cash to enjoy the things that are.
And that's what you're doing: ditching the unimportant stuff. It's not hard, you just choose the things that really matter to you and ignore the rest.
Work with what you have. There's no need to upgrade your car if the one you're driving now gets you from point A to point B. If your current home isn't to your liking, make some updates or redecorate - it's a far less expensive fix than purchasing an extravagant home that you won't be able to enjoy because you spend all your time working to pay for it.
The next thing to do is trim your grocery budget. You just need to be conscious of your purchases. It's possible to feed a family of four for under $10 a meal - with a high quality meal to boot!
And lastly, make saving a priority. Saving isn't optional. It's necessary for financial emergencies - and they always come up in some form or another. Treat it as any other bill each month. Saving needs to be a category in your Spending Plan - do it now if it's not already there!
If you'd like, break it up into pay periods. In order to save $800 per month in a 2-income household, each partner would have to set aside $100 per week. A $400 goal would be just $50 per week. When a savings goal is broken into manageable pieces, it's a far less daunting figure.
When you're unable to meet your saving goals, either find a way to make more money, or spend less money each month. If you're able to trim the fat from your monthly expenses, there will always be a way to meet your savings goals.
And lastly, but also important, is to budget your "fun money" as well. When you budget a set amount for unnecessary shopping trips and entertainment, you can't shop until you drop. When the money runs out, you're done. At the same time you don't need to feel guilty if you buy that magazine or have a coffee on the way to work.
And that's important. Budgeting and saving isn't a punishment, it's a lifestyle plan to get you to your financial goals faster.
Your entire life doesn't need to change in order to live below your means. It's all about minimizing your expenses where possible and refusing the urge to live larger - even if you have the means to do so.