How to Live on a Tight Budget
Living on a tight budget doesn't have to be accompanied with stress and melt down. Giving up and declaring bankruptcy might seem tempting at times but let's face it, do you really believe that the banks will let you off the hook that easy?
Living within ones means is probably the hardest thing that we all have to master before achieving true financial security. It is hard but is totally possible for anyone in any financial situation.
My boss once told me something I'll never forget. As a self-made millionaire he was feeling the financial crunch as much as I was - and I was making a mere fraction of his income. He said that "the more money you make, the more you'll end up spending."
So what is the trick to being financially secure? Living within one's means? - That's it! Sounds easier said than done, I know. So what if you live in New York City and make $15,000/year? What then? Well It'll be tough for sure. The only thing I would suggest is to really prioritize what you want in life, what do you want to achieve? Maybe living in NY working minimum wage is just a bad idea. Leave those jobs for the kids who are working through college or living with their parents.
Here are some tips I have learned so far on how to survive on a very tight budget.
1. Find a place you can afford
This one should be obvious but it is the most overlooked step in achieving financial security. Paying off a mortgage you can afford will pay better in the long run over a mortgage you can barely just afford.
As a general rule of thumb make sure that you pay no more than 30% of your net income. Most hand over 50% of their living costs to the bank. You simply cannot survive doing this. You will end up cutting necessary expenses like health or insurance to make sure the house or rent is paid.
If living within your means implies moving, than move! It will be way cheaper in the long run if you do.
2. Live on cash only
This one might seem foreign in these days with credit cards and debit machines. Cash only means not paying for anything without cold hard cash in your pockets. You might think that your money is safer in the bank but honestly we all know that we are our worst enemies. We tend to spend more if we do not see what we are spending. Until debit cards have a money counter integrated on it you will never be able to truly know how much money you have in the bank.
Plus, we've all faced the scenario when we had to pay something but the funds bounced causing a bank fee to be incurred. The less money you keep in the bank the more likely you will have to pay more than average on bank fees.
No, the only way to really keep you money safe is to keep it with you. Keep the majority of your money locked away safe when you are not home and only take small amounts when you go shopping.
3. Frugal Living
'A penny saved is a penny earned.' Saving your money is the best way to make sure you have enough when you really need it.
Cut up your credit cards or only use them for emergencies. Never buy things now with the intent on paying later. Later comes quicker than you think and unless you know what the future holds, you should avoid paying interest on anything. Save your money to buy that new TV, table or kitchen set. You may rationalize these purchases as necessary, but try to avoid the temptation. Buying now means sometimes paying for the item purchased four time the sum in interest. If that means going to the laundromat for a few months while you save for a washing machine then do it. Watch TV at your friends house. Avoid interest as if it were the plague.
Other ways to save money is to shop at thrift stores for clothes or housing items. Purchase 'no name' brand foods and shop with a handful of coupons.
4. Do it yourself
One of the best ways to save money is to just simply do it yourself. If your car breaks down, plug in the symptoms into Google Search and zero in on the solutions. There are a great many resources on the internet that provide free info on how to do everything from building a log house to home maintenance. Most of the time repairs are so simple to solve that you end up kicking yourself after watching a professional take your money after working just 5 minutes.
5. Pay yourself
The last thing I want to mention is the nearly forgotten rule of paying yourself first. This is similar to saving your money except that instead of saving whatever money you have left over after paying all the bills, you are paying yourself a salary for your services. As a general rule of thumb, save 10% of your paycheck for this. You work hard for your money and if you think about it, being able to allot 10% of everything you make to yourself is not a whole lot to expect.
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