When you are financially responsible, you are living a life that is well within your means. This simply means that you are constantly making sure that your debts and expenses do not outweigh your income. However, many people quickly realise that this concept is often difficult to put into practice. Credit cards, loans and other ways of acquiring fast cash can lead you to purchase items that you would not be able to afford on your income alone.
Eventually, your debts will be more than you can pay back, and this will force you to make major financial changes unless you want to end up in financial ruin. Fortunately, we have come up with seven secret tips to help you live easily on a budget.
Calculate Your Income
The first thing that you should do is take an assessment of what your particular means are. It is not enough to just understand what you make per hour or what your yearly income is. You must also know:
- Your net income
- How often you get paid
- How much you are paid monthly
Weekly payments should be multiplied by four and bi-weekly payments should be multiplied by two so you will know how much money should come out of your pay.
Do Not Spend More Than You Bring In
This should be obvious, but after you know how much money you actually make, you can then begin to create a budget. You should focus on reducing your expenses so they will fit into your income.
Look For Ways to Increase Your Income
If your expenses are minimal, and you are still spending more money than you are bringing in, you may want to consider ways to give your income a boost. This may mean getting a job that pays more or even getting a second job. The most important thing is to do what you need to do so you can pay your minimum expenses.
Stop Using Your Credit Cards
The best way to live within your budget is to not include credit cards as part of your income. The cards are unreliable especially if the credit card company decides to close your account or decrease your limit.
Do Not Try To Impress
While most people enjoy having nice things like a new car and spending money at swanky restaurants, you should not make purchases simply to impress others. Although you may be able to fake wealth for a period of time, eventually you will dig yourself into a financial hole. Having said all this, the classic car trade may well prove to me a wise investment, according to this infographic. The value of classic cars has risen by 200%, which means it is a more financially viable investment then fine wine, gold, art, or even stocks. It may be worth a little thought.
Save Money for Purchases Instead Of Using Credit Cards
You may want to use a credit card to make a large purchase, but it is a wiser decision to save the money for the purchase instead. Put back a small amount every month until you are able to buy the item outright.
Start an Emergency Fund
Having access to a savings account that is used strictly for emergencies can help you when you are in a financial bind, and can save you from resorting to credit cards or applying for loans. It is ideal to have an emergency fund that is equal to several months of income, but you can start small and add smaller increments of money as the months go by.
When implemented into a realistic financial budget, you will be able to improve your financial situation and spend your money in a responsible manner.
