Live Beneath Your Means or Risk a Rocky Road



If there’s one overreaching rule governing effective personal financial management, it’s to live below your means. The straightforward concept simply mandates that you earn at least enough money to cover your customary monthly outgoings and any additional expenses incurred during a particular span of time. Evaluating your income and spending as seldom as once a year will tell you whether or not you’re living beneath your means, but families living close to the financial balance point need to keep nearly constant tabs on cash flow, or risk falling behind.

For the purpose of personal budgeting, it’s a good idea to track cash flow in monthly increments. Most credit accounts are established for monthly repayment, so when charges spike during a given month, you can quickly correct the overspend, before it becomes a larger problem. Your rent or mortgage payment represents another substantial monthly responsibility, which may be easier to account for than some other types of spending, because the payment amount doesn’t change from month to month. Other important spending categories to account for include energy bills, car payments, subscription services, communication costs, food, household expenses, and entertainment – to name a few.

Taking financial inventory is a good step toward stability, but it isn’t enough to turn things around. For lasting results, you should not only examine your finances frequently, but also take action to improve your financial outlook.

Britons Feel Like They’re Living Beyond Their Means

A recent survey found many Britons polled feel as though they are in a negative financial cycle. In fact, a large percentage of survey participants indicated they turn to overdrafts and credit cards to make ends meet, when their monthly salaries fail to cover expenses. As many as three in five of the 2000 consumers polled have already taken measures to reduce their daily expenditure to a more affordable level. From these and other responses, it’s clear pressure to live below their means is driving change among British consumers.

If your income and spending feel like they’re at odds, adopting these productive strategies can help you consistently live beneath your means, without compromising your standard of living.

Make Informed Financial Decisions – Haphazard financial management leads to inconsistent outcomes, which can herald costly lessons. Fortunately, you can avoid many financial pitfalls by staying informed and making wise decisions. If you’re nearing retirement, for instance, consult with a professional advisor or financial charity, for the information needed to prepare a comfortable nest egg. And if you’re in the market for a loan, use online resources to compare different types of loans and secure a lender you trust. From personal instalment loans, to short-term financing for bad credit applicants, websites such as Readies help you weigh the costs and benefits of each option and make informed borrowing decisions.

Try to Live Off One Income – If you’re a member of a multi-income family, it’s easy to let your spending grow to fit two salaries. But what if you could live off a single income? Committed savers have found ways to make it work, diverting the other earnings to important financial goals such as paying off debts and investing for the future. If you’re successful living off one income, the “found” money brought in by other members of the household can also be applied to home improvements, education, or car repairs and maintenance.

Downsize – If your mortgage and household expenses are dragging down your budget each month, downsizing can help you regain control of your spending. Particularly when your property is too big, moving to a smaller, more affordable house creates a ripple effect, resulting in savings on taxes, insurance, energy, maintenance, and more.

If relentless pressure to keep pace with spending demands has you feeling like you’re in over your head, there may be steps you can take to stabilise your finances. A close look at household cash flow patterns can help you identify problem spending. Downsizing, staying informed about finance and economics, and setting strict spending limits are three good ways to relieve your financial worries.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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