As a nation, we love to shop and entertain ourselves, but sometimes that consumerism leads to debt and monthly financial struggles.
Here are 10 tips to make sure you never end up with more month than money.
1. Know your income and expenses
The first thing you need to know is what’s coming in and what’s going out.
Make a list of any and all income you have from your job, side work, pension or anywhere else. Then make a list of every bill you have, from rent to car payment. (Don’t forget bills that may not arrive monthly, like car insurance.)
These are your fixed expenses – the ones you have limited control over.
The difference between your income and fixed expenses is what’s left for the expenses you can control — your variable and discretionary expenses.
Most of us have sufficient income to cover our fixed expenses. After all, we wouldn’t have taken on obligations we couldn’t pay. It’s the variable and discretionary expenses that so often get out of control.
2. Track your expenses
A spending plan, otherwise known as a budget, is the single best way to ensure you live within your means.
A spending plan is exactly what the name implies: It lays out what you plan to spend. To keep tabs on your progress, or lack thereof, you’ll need to track your money as you spend it.
If you want to live within your means and reach your goals, you have to track where your money’s going. It’s the only way to nip problems in the bud.
3. Separate wants and needs
When it comes to shopping, knowing the difference between a want and a need will help keep you out of debt.
Before you make a purchase, ask yourself if you really need it. If you don’t, wait before you buy it. I use the 48-hour rule.
If I see something I want to buy but don’t think I absolutely need, I’ll wait 48 hours before I buy it. More often than not, I change my mind.
4. Don’t compete
Don’t fall victim to the “keeping up with the Joneses” mentality. Sure, your friends or neighbors might drive nicer cars, have the newest technology, or take expensive vacations, but that doesn’t mean you have to do the same.
Think of it this way: Your neighbor might have financed that Mercedes, put the new flat-screen on his credit card, and taken out a personal loan to pay for a vacation.
You’re not a lemming; don’t follow the group off a cliff.
5. Keep an emergency fund
Life is unpredictable. Your car can broke down, you can fall ill twice, or you may even have to take unexpected time off work for family issues.
Without an emergency fund, you may have to take a loan.
If you don’t have three to six months of expenses saved up, start saving now. When something goes wrong, and it will, you won’t have to take out a loan to pay for it.
6. Save money wherever possible
Saving money will help you stop overextending yourself financially. Try these tips to get started:
• Never walk into the grocery store unprepared. Before you shop, clip or print out coupons, check the weekly circular, and make a list.
•Buy secondhand. You can find incredible deals at garage sales or in thrift shops.
7. Cut down on expenses
If you’re still struggling to live within your means, take a hard look at your expenses. There is probably something you can cut out or at least cut down on.
Go through your bills and identify what you don’t really need.
8. Boost your income
If all else fails, boost your income. The simplest and most gratifying way is to make more at your current job by getting a raise.
If that’s not in the cards and you routinely find yourself struggling to make ends meet, it might be time to look for a better-paying job.
Of course, there are many other ways to increase your income, from selling your stuff to side jobs to turning a hobby into a business. Where there’s a will, there’s usually a way.
9. Be Healthy
Nothing can send you into a downward financial spiral like medical bills, planned or unplanned. Maintaining a healthy body through healthy living is so important.
Do everything in your power to be healthy and you will save thousands of shillings in medical bills every year.
10. Don’t deprive yourself
While this is the last tip, it’s the most important one.
When you hear terms like “living within your means,” especially when combined with words like “budget,” it’s natural to think about deprivation.
Spending less on entertainment by hosting some friends at home instead of paying thousands of shillings at a restaurant doesn’t negatively impact your life. You can live within your means and still enjoy life.
The trick? Substituting imagination for money. Think about what you really enjoy — then find a way to get it for less.
This article was originally published in Mint.