How to Live Below Your Means

Many times financial articles seem to focus on the perils of living above your means. The risks associated with this type of reckless financial behavior are certainly well-documented. Almost everyone can grasp the concept that if you spend more money than you earn, your financial house of cards will eventually collapse.

What many people may not be aware of is what encompasses a life well-lived below your means. Some simple ways to consider this prospect are:

• Live a comfortable life, but not a wasteful one.
• Don't buy things to impress other people.
• Understand that true wealth is not measured by the material objects you possess.
• Always manage your money wisely- never allow your money to manage you.

The Fundamentals of Living Below Your Means

If you are like most people, you work very hard for your money. Whether you are employed by a large company, a small retail establishment, or own your own business, the income you earn is what allows you to live a certain lifestyle including doing the things that are important to you. Be aware that each decision you make concerning your money has a significant bearing on your overall financial health.

The road to financial independence can sometimes be a rocky one. The good news is that no matter what financial situation you currently find yourself in, you can begin making positive changes that will have an enormous impact on your future financial well-being.

The following ideas should help you get a clearer picture of what it means to live below your means.

• Decide what "rich" means to you personally. Unfortunately, we live in a consumer-driven society in which many people strive to keep up with everyone else as far as worldly possessions. A newer car, a bigger house, the latest expensive electronics and gadgets... the list is endless. Smart money managers understand that the true meaning of "rich" should be having enough money to meet your family's basic needs (housing, food, and clothing), getting a few of your "wants", and saving for the unexpected and retirement.
• Stay away from the mall. It will probably not surprise you to learn that many people shop when they're bored. You may be an emotional (impulse) shopper yourself. The hard financial truth is that nothing can wreck a budget more quickly than unplanned, impulse purchases. The best way to avoid this situation is to stop going to the mall. The same holds true for buying items online. It can be difficult to stop this addiction (which is really what it is) but financial freedom is virtually impossible to achieve unless you do so.
• Try to avoid being bombarded with advertisements. This can be hard! The ads are everywhere... billboards, magazines, television, over the internet. No matter what item is being advertised the message is usually the same: without this product, you are incomplete, not quite good enough, have an unfulfilled need, etc. etc. Don't believe the hype! You've survived just fine up until now and the odds are you will get along quite nicely without purchasing whatever the advertisers are selling.
• When you make a purchase, use cash. Studies have shown that people who shop with cash tend to spend less than those individuals who use credit cards. Consumers who buy with cash also tend to give more consideration to what they are purchasing. Psychologically, it is more difficult to part with cash than to just take out a credit card. Leave your credit cards at home when you shop.
• Lead a healthy lifestyle. Many people don't realize that one of the main reasons individuals have to file bankruptcy is due to enormous medical bills. And a large percentage of these people have insurance coverage (but not enough to cover what they owe). In other words, it pays to stay healthy! Numerous medical findings suggest that a physically active older person is actually healthier than a physically inactive younger person. It's never too late to start.
• Learn to stay at home and relax. Get over the idea that you have to go out and spend money to have a good time. Prepare a great meal at home. Rent a movie instead of heading to the Cineplex. Re-discover the joy of curling up with a good book. Don't equate spending money with being happy.
• Prepare for the (financial) unexpected. Having an emergency fund is pretty much non-negotiable. Most financial experts suggest a thousand dollars as the absolute minimum. The conventional wisdom used to say you needed to have three months worth of salary tucked away but given the current economic climate, that number has risen to having anywhere from six months to a year's worth of salary stashed away in a savings account. If you live above your means, even the slightest unplanned monetary need can be devastating. You never want to have to take on new debt to handle a financial emergency.
• Stop trying to keep up with everyone else. This is just a "lose-lose" situation no matter how you look at it. Humans are competitive by nature and unfortunately, envy has a way of creeping into people's thoughts also. Work to find your own meaning of happiness. Being financially secure and independent are two great goals worthy of your time and effort.
• Properly manage your time. Get organized. The fewer things you have to do, the less time you will have to spend on them. Focus your energy on the things that really matter to you. You may have read about the minimalist movement going on across the country right now. Much of it may be due to necessity, but many people are also signing on to it for more personal reasons. Simplify, reduce, and eliminate. Individuals are discovering the pleasures that come from making do with less and not being overwhelmed (smothered) by their possessions.

There's no denying it- it's tough in this day and age to ignore all the trappings of (supposed) wealth. We are constantly reminded of what others have and why we should have it all, too. Or even more! But the road to financial ruin is paved with the stories of millions of consumers who tried to keep up with their neighbors (or friends, or colleagues, or whomever) and financially collapsed trying. Set yourself on a smarter path and reap the rewards of real financial security.