Do you find it difficult to live under your means?
I also found it very difficult until I was shown these 5 ways that I share with you today.
I just had a conversation with a friend who has big problems with his finances and also
problems with living below his means.
We talked a little bit and it turned out to be a problem that I've seen many times now
with others.
I showed him a way, which we will also discuss in the video today, with which he managed
to gain control over his finances and solve the problem.
It is, by the way, the biggest problem that people have when they don't manage to live
below their means and if this particular problem is not solved, it becomes very difficult to
achieve one's financial goals.
But before we dive into the topic : Hello and welcome back to our channel ! And if you
are new here : We are the finance nerds and on this channel we are helping hardworking
people like you to get more out of your hard earned money by showing you how to use your
money in the most effective way.
Remember to give this video a thumbs up at the end, if you got value out of it and now
let’s start.
Now before we start with the 5 ways you can live below your means, what does living below
your means actually mean, I mean really specifically?
It means to spend less than you earn" And with that I can already end the video"
All kidding aside, living below your means is simply not living paycheck to paycheck
anymore.
But why do so many have problems with it?
Well, we'll get to that when we get to the 5 ways that will show you how to live below
your means.
But Why should you do all this in the first place?
You probably want to achieve your financial goals, whatever they are, right?
But have you ever thought about what else it might bring to spend less than you take
in?
It gives you a more stress-free life, more flexibility in your career, and if it's your
goal, achieving financial freedom as well.
No matter what your goal or intention is, it starts with living below your means, gaining
control of your finances and saving money and that's what we're all about now!
Way 1: Track Your Money And Spending
The first way is to track your money and expenses.
This is and must be the first step to even see where you stand.
Are you living below your means, within your means or above your means?
In order to determine this, you must first have clarity about what your financial situation
actually looks like, because many underestimate by far what they spend per month!
How can you do that?
It's easy with the help of 3 steps: 1.
put your income and expenses in one place.
Many of you have multiple bank accounts or multiple credit cards where money is put in
and taken out every month.
It's easy to lose track of your expenses and you'll find that 1 or 2 bills are no longer
on your list.
Therefore, it is advisable to track all your income and expenses in one place.
There are several ways to do this: There are providers such as Mint that make your work
easier, or you can do it for free with your own spreadsheet.
If you want to do this via a spreadsheet, you should watch our next video, which I'm
linking now in the top right corner, if it's already public.
Or subscribe to our channel so you don't miss the next video where we show you our own tracking
sheet which we use and then also make available to you to download for free.
Whatever way you choose: List your total income versus your total expenses.
You can already start categorizing your expenses such as: rent, electricity, internet, living
expenses etc. and also look at what are fixed expenses and variable expenses.
2.
see now how much you have after your expenses Is there any money left over at the end of
the month, does it add up or do you pay even more than you take in?
Please keep in mind, even if it adds up exactly you could still get into trouble.
There can always be unexpected expenses, which, by the way, are the ones that bring most people
to financial ruin and into debt.
3.
track your expenses now monthly The final step now is to keep track of your
expenses monthly and include them in your way that you use to track.
With this you pursue the goal of firstly getting an overview of which unnecessary expenses
you can reduce and secondly also to avoid impulsive purchases and if they do happen
to reconsider, because you must finally include them in your monthly bill.
If you have done this, then you have created the foundation.
And in the 3rd way we will continue to deal with how you can track your finances even
better and plan for your financial goals.
Way2: Pay Less Interest And Get Rid Of Debt
The 2nd way is to pay less interest and get rid of your debt.
Debt is the biggest nightmare for your income and financial situation
and makes it almost impossible to live below your means, which we discussed earlier, really
has a lot of advantages.
The interest you have to pay every month reduces the income you get every month which makes
the difference between income and expenses lower.
But we want the difference to be bigger, be it an increase in income or a reduction in
expenses.
So how can you specifically get rid of your debts and reduce the interest?
I brought you 3 ways to do that: 1.
refinance your debt.
When you refinance your debts, you bundle your current debts and exchange them for a
loan with lower interest rates, so you pay less interest every month.
Again, there are several providers for this, but your bank can also assist you.
2.
50/50 Rule The 50/50 rule works like this: if your income
increases and you get a bonus, you don't use this money to spend it completely, but use
50% of it to pay off your debts.
As an example: If you get a bonus at your work of $2000,
then you use $1000 of it for your debt repayment and the others you have at your free disposal!
The 3rd tip is budgeting That brings us right to way 3!
Way 3: Create A Budget
The 3rd way is to create a budget and I have already made a video about this, which you
can now find in the top right corner, but as I said in the video, creating a budget
is the most important step to stop living paycheck to paycheck, to gain financial security
and to reach your financial goals.
The bulk of it should be done by now, you've put your income and expenses in a place where
you can keep track of them and track them.
Before I forget: Your income should really include all income you have, for example child
support and tax refunds etc.
But what's the point of keeping track of everything if you want to reach your financial goals?
Right at first nothing, which is why it is now important to restructure your budget in
a way that you live below your means and can then achieve your financial goals with the
money you save.
The easiest way to do this is to create a percentage budget.
You probably know the 50-30-20 budget, where 50% of your income is for Needs, 30% for Wants
and 20% for Saving and debt repayment.
In itself, this distribution is good, but usually not individual, which is why I recommend
you to adjust the % numbers to your current situation and where you want to go.
I can't help you with that now in general, though, so you'll have to sit down and think
about it and work out a budget that works for you.
Maybe I'll offer something like that in the future, a course that looks at you and your
situation and where you want to go and with which you can then create a clear plan with
which you can achieve your financial goals.
If you would like to do something like that and you would see an added value for you,
please let me know in the comments with the words "Financial Goals".
To give you an example of how I do my budget, I have left the 50% Needs as they are but
have 30% for Savings and Investments and 20% for my Wants.
The 30% Investments and Savings split again into 10% Savings and Retirement Savings and
20% in my Investment Portfolio.
Way4: Cut Down Your Expenses
The 4th way you should use to live below your means is to reduce your expenses and this
is now relatively easy after you track your spending and create a budget and see everything
at a glance.
When you look at your expenses now ask yourself: "What are meaningless or unnecessary expenses?"
or ask yourself at an expense "Do I really need that?"
There are some areas where you can definitely save money and reduce expenses.
Some areas would be: Memberships, Car, Food and Drinks and Clothes.
There are a few more areas, but ultimately it's up to you.
If you don't know what meaningless or unnecessary expenses are for you, it helps to determine
your values in life and then ask yourself if this expense is in line with those values.
As an example, for me investing plays a big role in my life and it is a great passion,
so I save for example on clothes so that I can save money there, which I can invest in
turn.
Way5: Fix Your Money Mindset
Remember at the beginning when I was talking about the conversation with a friend and that
he had a big problem with his finances and I showed him a way that changed everything
for him?
That's exactly what it's about now.
The biggest problem is not the lack of knowledge or techniques that we need to use to be financially
successful.
The biggest problem is exactly in ourselves, in our head, in our thinking.
The problem is that we simply don't do the right things.
But why do we do that ? Well, to explain that I would probably need a whole weekend, but
to keep it short: It is our ego that tries to keep us in our comfort zone and "protect"
us from the unknown.
It is a primal instinct and also the reason why we find it difficult to discard old patterns
and adopt new ones in the form of habits.
But how do you change your mindset in such a way that you can establish good habits related
to your finances?
It starts with making the decision to be financially successful.
Sounds too simple?
Then I ask you, do you really have specific financial goals?
If not, then you haven't decided to be financially successful.
Define what financial success means to you by setting clear and specific goals and including
them in your budget.
For example: My goal is to have $500,000 in my investment portfolio.
I have this goal built into my budget where 20% of my income is invested in my portfolio
each month.
So set yourself clear goals, decide to be financially successful and you'll be living
below your means in no time!
To Improve your financial situation immediately -> Watch the video in the middle now where
I show you the 5 Frugal Living Tips With Big Impact That Work..
And If you enjoyed the video and now want to know more about how you can improve your
finances check out the video description.
There you will find more videos and resources to help you.
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