Budgeting - Importance of Living Within Your Means
Always Try to Live Within & Below Your Means
Live a comfortable life, not a wasteful one. Do not spend to impress others. Do not fool yourself into thinking wealth is measured in material objects. Manage your money wisely so your money does not manage you. Always live well below your means. For example, if you make $30,000 a year, then live like you make $25,000 a year and save, pay down debt, or invest the remaining $5,000. So many people that have an income over $75,000 and even $100,000 spend everything they earn and have almost nothing to show for it.
Much of living beneath your means requires seeing through the false promises of prestige and fulfillment found in advertising. Be smart and do not fall for that nonsense. And, it takes discipline to resist peer pressure, but whenever you're doing something worthwhile, you have to stand up for your convictions. Living beneath your means is a proven way to avoid debt and the stress that goes with it. Being debt free and having an emergency fund in the bank for a rainy day provides peace of mind and this can be more of a "luxury" than having a useless possession that simply serves the purpose to impress others.
There is a fine line between spending appropriately and spending above your means. Just remember that it is always better to forego purchases until you can pay for them in cash rather than to borrow from the future to meet your needs now. The most common exception to this rule is buying a house. Although it will raise your cash expenses dramatically, it is often wise because 1) it’s an investment which will add to your future net worth, 2) the interest is tax deductible which effectively lowers your income tax liability, 3) your mortgage payments will add to your net worth as you pay down the principal on the loan, and 4) you were probably paying rent anyway so it will in effect turn your rent payment into an investment.
Live a comfortable life, not a wasteful one. Do not spend to impress others. Do not fool yourself into thinking wealth is measured in material objects. Manage your money wisely so your money does not manage you. Always live well below your means. For example, if you make $30,000 a year, then live like you make $25,000 a year and save, pay down debt, or invest the remaining $5,000. So many people that have an income over $75,000 and even $100,000 spend everything they earn and have almost nothing to show for it.
Much of living beneath your means requires seeing through the false promises of prestige and fulfillment found in advertising. Be smart and do not fall for that nonsense. And, it takes discipline to resist peer pressure, but whenever you're doing something worthwhile, you have to stand up for your convictions. Living beneath your means is a proven way to avoid debt and the stress that goes with it. Being debt free and having an emergency fund in the bank for a rainy day provides peace of mind and this can be more of a "luxury" than having a useless possession that simply serves the purpose to impress others.
There is a fine line between spending appropriately and spending above your means. Just remember that it is always better to forego purchases until you can pay for them in cash rather than to borrow from the future to meet your needs now. The most common exception to this rule is buying a house. Although it will raise your cash expenses dramatically, it is often wise because 1) it’s an investment which will add to your future net worth, 2) the interest is tax deductible which effectively lowers your income tax liability, 3) your mortgage payments will add to your net worth as you pay down the principal on the loan, and 4) you were probably paying rent anyway so it will in effect turn your rent payment into an investment.
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