Living within one’s means involves being able to get by on the money you have coming in each month without having to go into excessive debt to maintain your current lifestyle. But how can you tell if you are really living within your means, and what can you do if you discover that you are not meeting your goals?
Whether you bank online or you prefer to receive paper statements in the post each month, checking your bank statements can help you see if you are living within your means or not. Play close attention to incoming funds and outgoings to see if you are spending more than is coming in each month. Dipping into savings occasionally won’t hurt, but if you have to regularly draw money out of savings just to cover the electricity and gas bills or for groceries, this is a clear indication that you are not living within your means.
Credit Card Debt is Going Up
If you hope to live within your means, one of the first things you will want to tackle is credit card debt. With huge APR’s, late charges and other fees to contend with, it makes economic sense to pay off credit card debt as quickly as possible. But if your credit card debt has steadily increased, rather than decreased over the past few months, then something has to change about your spending habits before they spiral out of control.
There is Money Left Over for Savings
A savings account is not just necessary for older ones as they prepare for retirement. Everyone should aim to save a portion of their earnings each month to help cover the costs of unexpected bills, excursions, or larger purchases. If there is money left over each month to go into savings, then this proves you are living within your means.
Create a Budget
After checking bank statements, credit card debt and the balance of your savings account, you will have a much clearer idea of what to include in your budget. Where do you have a tendency to overspend? Is it on coffee or meals out each day? How can you tackle debt that has crept up over the past few months? If your savings account has grown over the past year, but your credit card debt is still high, aim to pay off a bulk (if not all) of the balance and continue to aggressively tackle the debt until it is gone. A budget can help you to re-direct your money so that it works better for you in the long term.
Finding out that you are not living within your means can pose a number of problems, as debt creeps up and takes over. To find out how you are doing, check bank statements, credit card debt and the balance in your savings account. Then create a budget based on your findings that will help you to target debt while allowing you to have money left over for savings or other pursuits.