(This is a guest post from one of my friends, Raymund Tamayo. Visit his blog here for his productivity, personal finance, spirituality and minimalism tips. Thanks for the awesome post, Raymund!)
|Tea and bread are enough for my breakfast! – Lianne|
Living within your means is the key to financial success. My wife and I have been applying this principle ever since we decided to become simplifiers in January 2010, and we have been blessed with a growing financial health.
1. Evaluate your financial habits. At this time, be honest about yourself. Most people handle money without control or care. And they usually get shocked by the end of the day about where their money went. Take time to track where and how you spend money. Knowing where your money goes makes it easier for you to manage your finances and cut back on unnecessary expenses.
2. Make a budget. And stick to it. Use your budget as a guide to control your spending. This will make sure that you spend within your capacity to earn. As in every area of life, it will take discipline to do this. Realize the importance of budgeting to have a healthy financial life. If you don’t plan how you’ll spend your money, you’ll always end up in the same place financially: you’ll have nothing at the end of the day.
3. Find ways to cut back on expenses. This is about being wise and frugal. There are tons of ways to do this. Realize that buying is not always the solution. Make your life count. Focus and simplify. Appreciate that the best things in life are usually free.
4. Build an emergency fund. An emergency fund is critical for financial health. It gives you a buffer for unexpected expenses, so you don’t spend more than you earn by blowing your savings and your budget or by using credit cards. More on this in a separate article.
5. Don’t buy on credit. I personally don’t believe in credit cards. When I want something really bad, I save up for it. I believe that our wants can wait. The only exception I feel we can enter into credit is when we use it for business, or when purchasing a non-depreciating item such as a house or land. There’s no such thing as “easy” installment payments. Believe me, every payment will be hard! One of the many traits of a truly successful life is learning delayed gratification.
6. Learn balance. It is very important to not take anything to the extreme. Living a simple life doesn’t mean living in deprivation. There are special days when my wife and I eat in a fancy restaurant. Or we splurge on a vacation once a year. If you can see our stuff, we own less but they are not cheap, and all of high quality. The point of living a simple life is prioritizing on which are most important to you, not putting yourself into misery.
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