There’s no better time to think about your finances than now. Sometimes just the thought of money can bring on a headache, but it’s important to begin thinking about it—unless you have a financial advisor, no one is thinking about our money but you.
As you’ve probably heard many times before, money does not grow on trees! What that really means is that money is not freely available. Instead, you have to work for it. So why would you continuously spend money if it’s not being replaced just as quickly?
Now, before that money headache starts, we ask you to take a deep breath, grab your favorite beverage, and read on. Check out these five ideas to help you live below your means, and stack that extra paper for a rainy day.
#1 Don’t Rely on Credit Cards
Credit cards seem great, in that they allow you to make big purchases if you don’t have the money up front, and they give you the ability to pay off those purchases over time. The downside is the high-interest rate that credit cards charge—if you can’t pay off your bill in full every month, you’ll end up paying more for every purchase just because of interest.
Astonishingly, only 35% of Americans have no credit card debt at all. This shocking number goes to show how tempting credit cards are, and how quickly they can get you into debt.
If you are using credit cards, we encourage you to use less than 30% of your credit card limit and pay the balance in full every month—or make extra payments on your debt until it’s done. Using more than 30% of your credit limit indicates to banks that you may be in financial distress, and negatively affects your credit score.
#2 Track Your Spending
If you don’t have a firm grasp on your finances from moment to moment, it’s easy to slip into bad financial habits. Once you’ve created a budget, consider tracking your spending to ensure you don’t fall off track.
Tracking your spending can be tough at first, but you can knock it out of the ballpark. By recording each purchase you make in a notebook, a spreadsheet, or as part of your budget, you will have to think twice before buying something. You will always know how much money you have left in each budget category.
This way, you might be less inclined to buy that $5 coffee when you know you have some at home, especially if you’re getting close to your spending limit on eating out. Tracking your spending can be one of the most important actions you can take to live below your means.
#3 Get Your Hustle On
If you work a standard 9-5 job, it can be difficult to pick up a second shift somewhere else without stretching yourself too thin. On the bright side, there are numerous ways you can monetize your hobbies and interests.
Everywhere you look, you can find people who are turning their hobbies into an income. Who’s to say you can’t do the same, as long as it’s not costing you more than you make?
Entrepreneurship is also a fantastic way to earn more income and help you live below your new, more profitable means. Consider starting a small business, or even working in the gig economy by driving for Uber, Lyft, DoorDash, or other organizations.
#4 Reduce Spending
Did you know that in 2017, the average income before taxes was $73,573, while the average annual expenditure was $60,060? That is not a lot of wiggle room, especially once takes are taken into account!
As you get into the habit of tracking your expenses, you should also start asking yourself, “Do I really need this?” Reducing your expenses is one of the biggest ways to ensure you are living below your means and saving for your financial goals, for emergencies, and for retirement.
Instead of going out for lunch and dinner, pack a lunch and cook at home. Since most gyms are following COVID-19 guidelines, canceling an expensive gym membership and exercising at home could help you save money. Take a look at all of the subscriptions you have, and see which of them you can live without—then save the difference.
You can also save money on debt. For example, if your credit card company is unwilling to negotiate a lower interest rate for a high-interest card, consider a credit card balance transfer. Balance transfers may have a small fee and APR, but these add-ons are typically lower than the rate of the card you’re transferring away from. Sometimes just telling your credit card company you’ve found a lower rate will convince them to give you a better deal!
By finding ways to spend less than you make and save money on your debt, you can get out of debt faster and save up for big purchases and long-term goals.
#5 Save from the Start
It can be beneficial to take some of your bread and automatically transfer it to your 401(k), Roth IRA, savings account, or emergency fund before your paycheck even hits your checking account. Saving right off the bat means you’ll never even miss the money.
In most cases, banks and employers allow for automatic transfers. When you get paid, funds can automatically be dispersed to different accounts so you can resist spending more than you should, while also saving for the future.
You can’t spend what you can’t see!
Implementing these five simple ideas has helped people keep more money in their pockets—and their retirement accounts—than they ever imagined was possible. If you’re trying to figure out how to live below your means, it’s time to put the pedal to the metal and see if these ideas will work for you!
Let us know which ideas you tried and what a difference it made for your pocketbook! Keep in touch and share with your friends and family. Find us over at IG and Twitter @citygirlsavings, and check out our CGS Facebook group, where community members like you have a safe place to share their money ideas.