Creating Financial Stability Part I – Live Within Your Means

International Money Pile in Cash and Coins

Image by epSos.de via Flickr

I write this in an era of continued global financial turmoil.  Debt crises, sinking currencies, and high unemployment plague many countries.  Financial problems dominate the lives of too many people, causing sleepless nights and broken marriages.

It doesn’t have to be this way.

While there are no guarantees, you can take steps to increase your immunity against money problems.  Life is unpredictable and many factors are out of our control.  But good preparation keeps you from being a victim of circumstance.

If you want financial stability and peace of mind, there are four main things you can do.  This post is about the first: live within your means.  The other three elements will be covered in future posts in the next month.

Spend less than you earn.  This is the most fundamental principle of good money management.

By living within your means, you will be able to save money and pay off debt if you have any.  This allows you to prepare and plan for the future.  You can reach your goals and have a cushion for the unexpected instead of being weighed down by debt obligations.  You also have more flexibility and choice which helps you adapt to changing circumstances.

A great tool to help you live within your means is a budget.  I know, I know, a budget sounds like a diet, restrictive and painful, about as much fun as getting a root canal.  If it makes you feel better, use the term spending plan instead.   After all, we’re all going to spend money – there’s nothing inherently wrong with that.  Why not plan for it so that we spend wisely and well?

Still, many of us resist using a spending plan or budget.  We believe it’ll be restrictive, it’ll keep us from enjoying life, and it’ll be difficult to follow.  But having a plan that works for you is actually very liberating.  If you tend to spend too much, a plan will keep your expenses in check and free you from fear of overspending and being unable to pay your bills.  If you’re prone to hoarding money, you’ll know that you are saving enough and can freely spend for the here and now.

A good spending plan/budget helps you balance your current needs and wants with progress towards future goals.  Now that’s freedom.

The key here is to create a system that works for you.  Realize that there are many ways to do a spending plan.  You just have to find one that is right for you.  One of my favorite blogs, Get Rich Slowly, has a nice list of budgeting tools and tips here.   It takes time and experimentation to develop a system that will be effective for you.  Be patient and open to trying different techniques.  The payoff in your financial well-being is worth it.

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