Live within your means

In personal finance and planning, the idea of frugality features as one of the surest ways to reduce your expenses hence to be able to have a positive difference between your living expenses and your income, however little it is. One of Charles Dicken’s characters put in the best way. “To have annual income of twenty pounds per annum, and spend twenty pounds and sixpence, is to be the most miserable of men; whereas, to have an income of only twenty pounds, and spend but nineteen pounds and sixpence is to be the happiest of mortals.” The important point that Dicken’s wanted to emphasize that if you earn one million francs every month but your total monthly expenses are one million and one thousand francs, then you are in trouble, because you have to borrow the one thousand francs in order to maintain your lifestyle. While, if you earn the same one million and your monthly response are nine hundred and ninety thousand francs, you have ten thousand francs every month to save towards a financial goal. The situation is much worse for most people. We borrow half of our salary to clear expenses and by the time we earn our salaries, half of it goes to paying back those debts. It is clear that such an individual is not living within their means. One option is to find the loopholes in your monthly expenses or what are referred to as ‘spending leaks.’ To discover your spending leaks you need to do a simple, boring but very necessary task of finding how you spend your money every month. After doing that, find ways of prioritizing your expenses into needs (those costs you can not live without like food, rent, transport) and wants (like movie rentals, entertainment expenses etc) and work on your wants list. Being frugal does not mean living a boring life or substituting frugality for meanness. If you choose to kick out using a motorcycle to work because you wake up late everyday but treat yourself everyday to a snacky takeaway lunch of chips and chicken, loaded with lots of mayonnaise makes your transport savings useless. Besides, you are loading another future expense in medical costs by feeding in an unhealthy manner. Instead if you wake up early, you have time to board a taxi and arrive at work fresh and ready to go. You help kick out the habit of oversleeping and can carry simple packed lunch, then once in a week you can treat yourself to a full lunch but still save money. But why should you continually punish yourself with cost cutting measures. Wealthy people have leant one thing about managing money. A penny spent today is worth ten pennies, if used later. If you decide, to use you decide to take a car loan and repay in three years because you want to keep appearances like fellow up and rising corporate fellows who work in blue chip companies, you will end up paying almost twice the cost of that car. Besides, the costs of maintaining that car after the loan installment deduction will drive you broke and into more debts. But if you could have chosen to save the cost of that car for three years and placed the money in an interest earning account, you could later buy the car at a lower cost and never have to pay a loan. The discipline of saving money would even convince you to buy a pick up truck for business instead of a comfy family car which becomes a liability and begins to lose value the day you drive out of the display room. The pick up will buy you a better car in a year and give you an income stream that will keep you financially at peace while the other fellow will be struggling above mountain of debt because they want to live outside of their means. kelviod@yahoo.com