Did you find this article useful?
This includes ensuring your monthly costs and living expenses are less than your net income. Essentially, balancing your books. If you can live within your means, you’ll be able to stay out of debt and save money for your future.
One way to work out if you’re spending within your means is to keep a daily record of where your money goes in a typical month. Try the following steps:
At the end of the month, work out what you’ve spent. Then subtract this from your take-home pay. If your monthly expenses are less than what you earn, you’re living within your means. If not, then you’re spending more than what you’re earning.
It can be humbling to see where you’re spending your money and how you allocate it. Analyse which expenses are priorities, and which ones you can cut. This will help you form a clearer picture of how you can make changes.
Making good spending decisions can be difficult when you have competing demands for your money. Try classifying your expenses into the following categories:
These are unavoidable costs, such as rent, mortgage, utilities, food, transport, phone, debit orders, and others. You need to cover these to keep you and your loved ones comfortable.
Things you spend money on that aren't essential. These can include eating out, going to the movies, buying new clothes, holidays, and treats. You can survive if you cut back on them.
Include the money you’re putting away for a specific purpose. Savings can be an emergency fund, short-term goals (like a holiday or big event), and long-term goals (such as a home deposit or retirement). Debts can include any regular payments you make to reduce a debt, like a mortgage or loan.
If you can keep these categories in mind when you’re making a decision involving money, you may be able to change your spending habits and improve your financial wellbeing.
Did you find this article useful?
