Contrary to what the advertisers of the world would have you believe, you don’t have to spend every penny of your paycheck to have a good life. Spending more money on more stuff won’t make you richer, thinner, sexier, more beautiful, or more popular. It’ll just leave you poorer — and no closer to your real financial goals, which may include buying a house, taking a dream vacation, or even retiring early.
So try this: Regardless of what your income is now, try living just beneath your means. If you earn $25,000 a year, pretend you earn $23,000. If you earn $50,000, live as if you earned $45,000. If you earn $100,000, try to get by on $85,000. As raises and promotions come along, boost your standard of living only enough to feel the reward, but not enough to consume all of the additional income. Keep doing this throughout your career and the gap between what you earn and what you spend will gradually widen. Your savings will snowball, and you’ll be well on your way to achieving your financial goals.
Get Pleasure Out of Saving
The key to developing a lifelong habit of living beneath your means is that you must never feel deprived. Saving has to feel as good as spending. Of course, you’ll need to turn a deaf ear to the many commercial messages that have been bombarding your brain ever since you started watching Saturday morning cartoons. In place of the advertiser hype, keep reminding yourself that the money you save holds the promise of an even greater reward down the road. That’s because your savings will be earmarked for the things you know you want — not what somebody else wants you to buy.
To stay focused on your goals, make a list of everything that is important to you. These might range from items you want to purchase within the next year, to having a million dollars someday. Whenever you’re tempted to buy something on impulse, check your list. If it’s not on the list, don’t buy it. If you decide you really want it, add it to the list. But don’t buy it on the spot. Stick to your savings plan; wait until you’ve saved enough to pay for it.
It’s okay to dip into your savings for the items on your list — as long as you have clearly thought them through and are not in danger of depleting your savings. In fact, you may want to keep separate accounts for near-term goals (1-5 years), mid-term goals (5-10 years) and long-term goals (more than 10 years). That way, you won’t be in danger of derailing your retirement plans to buy a new car or put a down payment on a house.
Live the Good Life and Have Money Left Over
Living beneath your means doesn’t necessarily require sacrifice and deprivation. Lots of people get by quite well on the amount of income you are proposing to live on. In fact, once you rethink your priorities, you may find that you can live better on less money. Who’s to say that a walk in the woods or building sand castles on the beach isn’t more enjoyable than an expensive afternoon at an amusement park? Some of the best things in life really are free, if you approach them with the right attitude.
Pay special attention to the money you spend out of sheer habit. You may realize that many of these expenditures provide little satisfaction and can easily be cut out. Here are some ways to live beneath your means and still have a good life:
When you eat out, make it count.
Fast food and quick restaurant meals can consume a large portion of your paycheck, and often the food’s not even that good. If you eat out a lot, consider changing your eating habits to include fresh, wholesome food prepared at home. Save restaurant meals for special occasions. Then choose a restaurant you really like (not necessarily an expensive one), and savor both the food and the ambience. One great restaurant meal can be worth 10 mediocre ones.
Take creative vacations.
Think of vacations as having three components: getting there; staying there; and doing stuff. You can save transportation costs by not going very far, or by driving instead of flying. You can save hotel expenses by camping or staying with friends. You can save on recreational activities by doing things that don’t cost money, such as hiking, swimming, or getting lost in a good book. By saving money in one area, you can splurge on another. Or by saving in all three areas, you can put the difference into a special vacation fund for your dream trip a few years from now.
Rethink your indulgences.
If you have a particular hobby or interest that sucks up a good part of your paycheck, periodically reevaluate the amount of pleasure you are getting from it. If it no longer provides as much satisfaction as it used to, find a new interest ñpreferably one that doesn’t cost as much. If you decide to stick with the same indulgence, find ways to cut back: go for biweekly facials instead of weekly ones; split season tickets with a friend; use the library more instead of buying books, videos, or CDs.
By planning ahead, you can avoid impulse purchases and find the best bargains. You can compare prices and watch for sales, or even shop at garage sales and check the classified ads for used items. Do this with everything you buy and watch your savings grow!
You can probably come up with a dozen more ways to get a handle on your cash flow. That’s the simple secret of financial freedom — learning to control your spending, rather than having it control you.