How and Why Should You Live Below Your Means?!

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By Miguel Dos Anjos


                Living below your means requires spending less than you earn. It does not mean having to deprive yourself, being miserable or not having fun. All that is fine as long as at the end of the month all the money coming in is more or enough to cover all monthly expenses.

                With credit cards, car loans, student debt and all the expenses you may have living below your means may seem hard or impossible. I have good news for you: it is surely doable. Here are some tools to help with that:


1- Budget

                Develop a budget and follow it. Write on a paper all your monthly expenses. Recurring expenses, and emergencies. Allocate an amount of money designated for the case of emergencies. With time, six to twelve months your budget will become more accurate. Once all Expenses are added subtract them from your your incoming money. As long as you get a positive number you are living below your means. If you end up with a negative number you are living above your means.

 

2- Increase your income


(A) Get a second job. 

Many people have more than one job. You may use an online search engine and find a part time job. A in person job, or from your contacts.  


(B) Become more skilled.

You may get a master's degree in your field and increase your pay. Learn a new skill on your field that makes your labor or service more valuable. Or just get a promotion at your job, company or another company. 


(C) Learn a new skill.

Another option is to find a better paying job. Maybe in a completely different field. Could be in a new area, or field and require or involve picking up knew knowledge or capabilities. 

 

3- Use credit cards wisely


                Credit cards have the power to easily and quickly snow ball with its super high interests making big banks lots of money off of you.

                A credit card can be a great tool to prove credit, and a good name. The way I approach this is I never buy anything with a credit card if I do not have the money to pay for it cash at that moment. Every purchase I make I do use the credit card. But the trick is that at the end of the month or the credit card cycle I pay that bill in full and never allow any interest to get applied to my bill. The good thing about doing this is that it shows lenders that you are organized, pay your bills on time, and help build your name and credit. Also you can take advantage of 1% to 5% cash back and other perks varying with credit card providers. The only reason credit card companies can offer such perks is because most people do not use credit cards in a way that benefit them but in a way that benefit the bank.

                Another point I’ll mention regarding using credit cards is that if any fraud happens you can call the credit card company and fight that transaction while using cash or a debt card, which is the same as cash, once the transaction has happened it is impossible or almost impossible to reverse it, or do anything to fix it.

               

4- Save

By having a budget you know what your numbers are or will roughly be for the month.  Once your check, or income payment comes in you know how much can be saved. So right away transfer that money to your savings account and save it; before you feel the urge, or tempted to spend it or find a new way to allocate that money.

 

5- House Hack or Downsize Your Home and Expenses

Housing is for most of us our biggest expense. So quick and easily all our money can be spent on housing. When house hacking we basically live for free or pay only a minimal amount. 


 (A) House hacking: 


The house hacking definition is to buy a multifamily house, live in one unit, become a land lord and have your tenants pay your mortgage for you. Having a multifamily house may require a lot of money up-front for an investment but there are other ways around it. Depending where you live you could also rent a room in your house or apartment for a few days or permanent (a year or more). Share your apartment or unit, where everyone comes together paying the bills. Or even having a roommate slashing your housing costs. Some of these suggestions do come with some loss of privacy but some individuals, especially someone that does not enjoy being alone, actually do prefer it that way. 

The last thing I’ll mention on this would be; just splitting your housing cost with your spouse. Something that is more common than ever now a days.

 

(B) Downsize your home              

                If all your money or a huge portion of it gets allocated to paying for your housing to slash that expanse you may downsize your home. Remember to keep it functional. For example if you drive to work would it still be drivable from your new house? Would you now, actually, be closer to work?

Do think long term choosing how much you will be downsizing. Do you have plans to develop a business soon and need space? Will you have kids now, or soon?

Also, consider hidden costs. For example you may save on monthly mortgage, and house taxes but will there be a building fee in the apartment or a community fee in a closed community? Moving costs? Etc…

By living below your means you can save enough for that dream tropical vacation. To get the dream house and actually be able to afford it, retire early or anything else you desire or pursue. 

 

Leave your comments and opinions down below!

Check my YouTube channel with more videos on this topic here: Make/Save/Invest 

Get my book here: Making Money While Sleeping

Thanks for sticking until the end and I'll see you on the next one!! 

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