It may seem like a challenge to live within your monthly paycheck. With some simple planning and spending strategies, you can not only stay within your income, but have money left to save at the end of each month.
Just as the key to weight loss is to burn more calories than you eat, the key to saving money is to spend less than you earn each month. This may seem easier said than done. However, most people do not realize how much money they spend on purchases that they do not need or even really want.
When learning how to live within your means, the first step is to look at your expenses and make a budget. Write down the amount of money you earn each month. Include all regular forms of income: paychecks, alimony, child support, and so on.
Next, list your necessary expenses. These are the bills you absolutely must pay each month, such as: rent, groceries, utilities, and car payments. Do not include anything that you could live without, such as satellite TV or cell phones. These costs are known as non-discretionary expenses.
Hopefully, the amount of money you make each month is more than the amount of money you must pay for necessities. Now, look at the other recurring monthly costs that you want to keep. This is where you will write down your monthly bills for cell phones, Internet and TV service, and other non-essential expenses. These costs are known as discretionary expenses, because you have a choice over whether to keep them.
After subtracting both your non-discretionary and discretionary expenses from your monthly income, look to see how much money you have left. Is there any money left? If not, you will need to look more closely at your discretionary expenses and find some places to cut corners. Perhaps you don’t need your Netflix account or the full DirecTV package.
Once you adjust your monthly expenses to fit within your monthly income, you should have some money left over. Divide this money into a spending allowance and an amount to keep in savings. You will always have some expenses that come up each month. Try to cover unexpected expenses with the money in your spending allowance so you can leave the decided on amount in your savings each month.
To keep from overspending, you do not have to deny yourself any luxuries. You simply have to weigh your purchases before making them. If you want to go to a concert, you might have to skip going out to eat at restaurants that month.
Here are some simple tips for ways to cut costs:
1. Cook at home, instead of going to restaurants or ordering take-out.
2. Bring lunch to work or school.
3. Cut back on TV packages or DVD rental plans.
4. Clip coupons for groceries, dining, and other purchases.
5. Watch for sales, particularly end of the season sales.
6. Play cards or board games, take walks, or visit museums instead of going out to expensive shows.
7. Listen to the radio or Internet radio stations, instead of buying CDs/MP3s.
8. When clothes shopping, buy a few good basics that mix and match well instead of stocking up on trendy items.
9. Do not impulse buy – research and wait a day or two before making purchases.
10. Avoid buying more with credit cards than you can afford to pay off at the end of the month.
It may take a little effort to change your spending habits, but with a little planning you can learn how to live well within your income each month.