You could have heard people tell you the need to live below your means to help you manage your finances better. Choosing this path would always lead to lower expenses, more elbow room with your spending as you get to free a lot more funds from your budget and it also gives you the chance to plan better for the future.
This is a great strategy because as Time.com shared, American consumers seem to be in constant credit card debt regardless how the economy is performing. They stated that on an average, a consumer between the ages of 18 to 65 years old could have about $4,717 worth of credit card debt.
This is not a small amount and could balloon to an even bigger one when consumers start missing payments and getting assessed ridiculous charges and fees left and right. Compound interest starts working against you and increases the amount you have to pay month on month as you miss payments.
This is actually one debt problem that is pulling you down and keeping you down. For a lot of consumers, they have a simple solution to this problem – be frugal. As simple as it sounds, trying to live below your means is going to be a lot of work. You need to put in the time, effort as well as persistence when going down this road.
Benefits when you live below your means
There is no doubt that you are trying to accomplish this task to help your finances. However, to help you get started with this financial practice, it could help you to know some of the non-financial benefits as well. They can give you the drive to finally start living below your budget.
- Reduces stress – CNBC.com explained in a recent article how financial stress can actually lead to alarming health complications. When you live below your means, you are able to reduce the worry you have over your finances and how your resources can cover all your expenses. It is a big deal when you know you have enough to cover what you need and that you are doing something for future needs like emergencies or even for retirement. You get to sleep better at night knowing that your finances are in order.
- Teaches your kids – Children usually emulate what they see from adults and properly managing your finances can have a positive effect on them. As you become more conscious of your spending and try to save wherever you can, try including your kids into the process. You can either ask for their opinion or try explaining to them how you are trying to spend below your means. As they grow up in this environment and exposed to how you think in terms of managing money, they get to be more confident in handling their own funds.
- Builds your confidence – When you are able to live below your means, you get to build up financial confidence in yourself as well. This can lead to better opportunities in life such as being a little braver in taking risks. This means that your risk appetite would change and make you a little bolder in trying higher return investments. When you know you are secure, it makes you more confident to take risks – higher risks result in greater returns. Your new found confidence can help you prepare better for your future.
- Breeds contentment – Being happy with what you have makes you feel content. This feeling of contentment brings about peace and security – which often leads to a higher quality of life. All these from trying to live below your means. Of course, it is not always a straight process where doing one would automatically lead to another but knowing that it can bring you to a higher quality of life should be enough the get you started with it.
Financial benefits of keeping your expenses lower than your income
If you are trying to figure out more benefits of living under your budget, here are some of them which you can use in your daily financial management.
- Regain control of your household budget. One of the most common scenarios in financial management is that consumers are having a problem at the most basic level – their household budget. You might be having a hard time making ends meet because your income is overrun by huge debt payments. It is also possible that you seem to find yourself dipping into your reserve funds more often than you should. This is because you always come up short. If you live below your means, you are in a position to lower down expenses and pay down debt. You come out of it in control of your budget.
- You get to reach your goals faster. The more you are able to save up on a constant basis, the better you can plan your finances. It helps you fast track your plans because you have the financial elbow room to move around. You can pay down the house a lot faster and pay off your student loans a lot quicker. You can even build up your retirement funds a lot sooner. This can give you the chance to enjoy your house and consider post-graduate studies. You can even retire earlier than scheduled and enjoy your golden years in quality living.
- You have the means to invest in your future. Gallup.com recently shared that there are not a lot of American consumers who are investing in stocks. Only about 52% of American consumers are invested in the stock market for a lot of reasons. It is possible that their risk level is not that high to consider the investment. There are some who might be afraid and does not know how it works. However, if you are able to live below your means, you get to free up some funds. You can then use this to make investments. This helps you get started and you can learn as you go along. You can even use the money for other investments. It can be to improve an existing skill or taking up a new hobby which you can later monetize. You might even have the chance to go back to school and take up post-graduate studies.
- You can afford to be generous. It is possible that you believe in giving back to other people. Living a frugal lifestyle can help you share your financial blessings with others. As you use less and save more, you get to help those in need of money. You can give to your church or even your community for social activities meant to bring everyone closer. You can even put some of your funds in crowdfunding projects which support ideas or causes that you believe in. It is nice to have a few more extra dollars in your budget. It makes it easier for you to spot occasions where you can help out.
There are a lot of benefits in managing your budget and trying to live below your means. Living on a frugal budget is one of the go-to financial solutions people use. This helps them out with their finances. Although it can get challenging along the way, you just have to look at the upside. Using less than what you need can help you start enjoying improvements in your financial life.