Are you also tired of living paycheck to paycheck?
According to a report by CareerBuilder, 3/4 of Americans live paycheck to paycheck every
month.
If you're one of those 78% to be exact, you're probably wondering how you can put an end
to it, right?
The answer is Frugal Living, which is why today I'm going to show you the 5 Frugal Living
Habits that will help you break the cycle and start having more money at the end of
the month for yourself, your family and your goals for the future.
One of the Habits I show you today at the end of the video is the solution to one of
the biggest problems most people have with their finances.
It's about getting to the root of your financial woes and if you don't pull that root, it's
going to be incredibly hard to change your financial situation in the future.
But before we dive into the topic and if you are new here… we are the finance nerds and
our mission is your financial freedom!
We help hardworking people like you to make more out of your hard earned money by showing
you our knowledge in the personal finance space and now let’s start!
First of all, let's talk briefly about why Frugal Living is the solution to the paycheck
to paycheck cycle.
The core of Frugal living is to be more conscious with your money and that's where the big difference
lies.
Most go very unconsciously with their money around and know at the end of the month probably
not even more, for which the money was spent at all.
Or they have not remembered certain expenses and have unnecessarily spent a lot of money
on other things and now have no money for the really important things that were due
this month.
But what exactly is meant by "consciously"?
It means prioritizing your spending and lowering the lower priority areas right there so you
have more money for the higher prioritized areas.
And by changing these spending habits and changing your lifestyle you automatically
change your financial situation and the cycle of living paycheck to paycheck can be broken.
In order to solve a problem, you must first become aware of it and then make a conscious
decision to change it.
You have to become aware of the root of why you live from paycheck to paycheck and consciously
change this circumstance with a solution that is tailored to you.
That's why you can't generalize the whole topic and you have to find out for yourself
what is currently going wrong and what you could do better and that starts with 2 things.
1.
you must make it a priority to pay yourself first 2.
you must also gain clarity for yourself, where you want to stand in the future and there
we are also right at Habit 1!
Downsize Your Life The first habit is to keep checking your circumstances
to see if they are really within your means or not and if they are above your means, then
reduce them again.
If you are simply living above your means it will never be possible to break the paycheck
to paycheck cycle, I think that is obvious.
But the main reason why people live beyond their means is because they buy more and more
things over time that they can't afford, like the new car, the way too big house or the
new TV for which a loan has to be taken out.
Exactly these are indications that you live beyond your means and have to take care to
downsize your areas of life and to check this constantly.
As a small guideline, if you are paying 30% and more on your rent or on your house in
general, it will be very difficult to break the cycle and it might be time for you to
move.
Yes it is uncomfortable, but who says change is comfortable?
Convenience is what got us into this situation in the first place, if we're honest.
So what's the best way to do it?
You should review your financial situation at least once a year and ask yourself if there
aren't areas where you can or maybe even need to downsize.
When you discover areas, you need to get out of your comfort zone and take action, because
these changes don't usually come easily.
Set Financial Goals Do you remember at the beginning where I said
that it is necessary for you to know where you want to be in the future?
That is exactly what this is about.
In order to change something you need to know where you want to go, to recognize what you
need to change in the first place and what will lead you to the goal.
There are many ways and methods to set goals and many of them make it incredibly complicated,
but the key lies in simplicity to get us to act.
When something seems incredibly complicated we keep putting things off, which is why it
is important to keep your goals simple.
Think about where you want to be in 3-5 years?
By that I mean in general and not just financially, because financial is only a means to an end.
Let's say for example you want to make a trip around the world in 3-5 years over a 1 year
period then the next consideration is how much money you need to do it.
Let's say you need about $1000 a month, which is a total of $12,000.
Now you have to plan how to get to this $12,000, because if you live paycheck to paycheck it
will be very difficult to get this sum together at all.
One way to do this is to set aside $200 every month, then you would have $12,000 in 5 years
for your world trip and that's what I meant at the beginning, that Frugal Living is about
prioritizing your areas that are important to you and then downsizing the others.
Because to save $200 a month, you certainly need to cut back on a few areas in your life.
Goals are the foundation, so serve as motivation to change anything at all about your situation.
Without them the cycle may never be broken.
If you want you can also plan your financial goals in our All in One tracking sheet, you
will find the download link below in the video description.
Search for Alternatives The next thing to do is to look for alternatives
again and again.
This ties in a bit with the downsizing, because here it is about looking for alternatives
that are cheaper and that can be linked wonderfully.
So if you have expenses that you want to downsize, but do not want to give up completely, it
offers itself to look for cheaper alternatives.
This can be small things such as from certain foods to larger fixed expenses such as electricity
or Internet.
There are now many providers that compare your rates for electricity and Internet and
allow you to lower rates and thus lower fixed costs.
We personally check our rates once a year and are able to keep our fixed costs very
low which also saves us from living paycheck to paycheck.
Make your money work for you The next habit is to use the money you might
be saving now to make your money work for you.
How?
By investing.
It is important to get into the habit of making your money work for you instead of constantly
working for money and spending it completely month after month.
The sums don't matter much at first, $50 a month is enough because it's about getting
into the habit first.... you can always scale up later.
In the future we will bring more videos about investing, but to get you started, choose
a broker of your choice, see our recommendation below in the video description and start to
save an ETF savings plan that covers the world economy and invest the money.
For example, you can choose an ETF that covers the MSCI World.
The MSCI World is an international stock index that tracks the performance of companies from
23 industrialized countries.
With an investment in the MSCI World index via ETFs you participate besides price gains
in the dividends of the companies, but you should always look at which ETF to buy exactly,
because each has its own little guidelines.
Change Your Mindset By far the biggest bottleneck most have regarding
their finances is their mindset and attitude.
And one pattern I notice over and over again is that some tend to pass the buck and blame
others.
Yes, there are situations where some can't help it and they are not to blame, but it
doesn't help to put yourself in a victim role and then expect change.
Self-responsibility is the number one quality you should develop, not for your finances,
but for your whole life.
Why?
Because through personal responsibility you always have the situation in your hand and
if you have it in your hand you can also change something.
No one will come to you and change your situation for you, you are completely responsible for
it.
You are self-responsible for getting the knowledge to solve your problems and self-responsible
for implementing this knowledge consistently.
You can be shown the door, but you have to go through it yourself.
And how do you do that best in practice?
Quite simply: You earn too little money?
Then look for ways to earn more money.
Do trainings, improve your skills, apply for a new job, you have it in your hands but you
have to do something for it.
You could save $2000 a month if you didn't pay so much for rent?
And yeah just something like that, I just heard the other day.
But even if that's really the problem, then find an apartment that's cheaper.
You want $1 million in your investment portfolio?
Very good, then get the knowledge, implement it and stick to your investment plan until
you reach that goal.
Life is not easy and the wishes you have don't just come to you - you have to do something
for them.
But many don't take action because they blame others and blame their circumstances for their
situation.
The solution?
Take personal responsibility!
And if you also want to get on the right track with your finances, get our free all in one
personal finance tracking sheet.
You will find the link directly in the video description
Learn more about Frugal Living and saving money here!
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We hope to see you in the next video.