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How to Live Within Your Means

-- 2011-08-23 1:00 am --

Many people find it hard to survive in a stunted economy while inflation flourishes, but that doesn't mean it's not impossible. It takes a lot of hard work and dedication to live within your means. You need to set up a budget and stick to it. This way, when you're in a bind, you won't be wondering how you're going to pay for that emergency car repair or medical bill.

A good rule of thumb to live by would be to split up your earnings into categories. Only 30% or less of the money you take home should go toward rent or a mortgage. You should always put 10% away in your savings account to build your retirement, and you should only dip into your savings in an emergency. The last 60% of your income should go toward other bills, food, gas, and entertainment. Entertainment is the last on the list for a reason. It is not a necessity. You should always make sure your money goes toward necessities and savings first. If there happens to be any money left over, you can play. Otherwise, find fun free activities.

In order to follow this budget, you have to save money on everything possible and sometimes just not spend at all. First think about your dwelling place. Is this as cheap as you can rent? Maybe there is another apartment a few blocks away that is $100 cheaper. If you have a mortgage, ask your lender if you can get a lower interest rate. Sometimes it works, sometimes it doesn't. If you are able to sell your house and not lose on it, try downsizing. Downsizing is hard because you end up having to get rid of some of your stuff, but it can be invigorating to throw out or give away the items that you really don't need or use. The other positive side to having a smaller place is that you'll end up saving even more money because you'll be less likely to buy more stuff. You know you don't have the space to put any of it.

Next, figure out how you can lower any of your other bills, like electricity. Only use high-powered electrical devices if you really need to. Set your AC thermostat to one degree higher and you'll save quite a chunk of change each month. Put your electronics on a power strip so you can turn it all off at once when you're not using any of it. Does your trash company have the lowest price in town? If not, switch companies. You shop around for all the things you buy, why not shop around for your bills, too? You can save lots per year by shopping around for gas prices. If you have a commute, figure out where the cheapest gas station is along your route and stop every other day to fill up.

Remember to save before you spend and you'll never be in a pinch when that imminent emergency takes place.