In this series I’ve written up the rules I follow for a life free of money stress. It’s really easy!!
To live happily you need to have your finances sorted takes and little bit of thought, some good habits and a touch of self control. All you need to do is make sure you live within your means while also having long term goals that you are working towards. Then make sure you are organising the money that comes in and tracking your spending, and doing this all simply.
How we live within our means?
Its really simple – we never spend money we don’t have in cash. If your income always exceeds your expenses then you will be happy. Sadly its really easy these days to borrow money and use this to buy consumables. When you start to borrow to cover your cost of everyday living, then the debt grows and payments start to steal your income, so you borrow more. Soon a few years have gone by and you have nothing long lasting to show for your hard
work and effort.
There are three easy tricks for living within your means;
- Never buy anything for your own use with a credit card, a loan, or finance. The one exception to this could be the house you live in, but even then you might be better off renting that owning a home. To live without credit you’ll need to save for purchases. Saving is an essential key to this. We live in a time of easy lending which makes buying large items quick, easy, and painless at the time. DON’T DO IT. Not being able to buy something as soon as you see it, no matter how good the price is a good thing. The discipline that saving for big items requires helps you think and about where your money is going.
- Ensure that debt payments do not consume more than 25% of your take home income. It’s easy to accidently let banks decide the lifestyle you can have by borrowing as much as you can afford.
- Plan to use the money you earn as it arrives – making sure every dollar has a job.
Whenever our household as failed to live by this principal and the result has always been miserable. Tempers are short, stress is high, there are few smiles and little laughter. Whenever we have this working money ceases being something we spend much time thinking about.
There is a lot of truth in Dickens’ old saying:
“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”
Charles Dickens – David Copperfield
In the next couple of posts I’ll go into more detail.
There is a whole body of work about living within your means. Whenever I’m tempted not to and to buy something of credit i find a dose of Dave Ramsey quickly stops me doing this. Rasmey has a simple system which many many people have found helpful to get their finances under control. Ramsey has a popular daily radio show and an hour or two this cures most overspending for me.
If you want to read more Ramsey’s best books are:
- The Total Money Make Over (available from Amazon, or maybe your local library)
- Love Your Life, Not Theirs (written by Dave Ramsey’s daughter, Rachel Cruze, available from Amazon, or maybe your local library
Another way to living within you means involves carefully control your living costs. There is a whole movement online of people living frugally and showing how a great lifestyle can be had without spending a large amount of money.
Mr Money Mustache has a lot of wisdom to share on this topic. The Mr Money Mustache forums contain huge wealth of knowledge and is a community of very smart individuals who are very good make their money work for them – highly recommended.