Before I get into investing, I would like to touch on an important part of personal finance: Living below your means.
Growing up, we lived below our means because it was necessary. We did not have enough money for all 12 children, but my aunt and uncle did a great job with what they had at the time. Living below your means is essentially, spending less than you earn. For instance, if you make $1,000/month and your monthly expenses are $1200, you are living above your means.
The goal here is to make more and expand your gap between your income and expenses. So you can save and invest.
Temptations are everywhere! Open your instagram and see pictures/videos of your friends vacationing. Turn on the TV and you see ads on things that you do not need to buy but want to. Verbalize to a friend that you want a new cell, then open Facebook and you see an ad about a phone. Siri, are you listening to my conversations? You bet.
Advertisements have become more personalized and tailored to what you search for on google while bored. Are you looking to material things for happiness? Are you feeling left out because all your friends are engaging in fun vacations, outings and parties? All these feelings are quite normal, but you have the power to make the changes you desire like I did.
Your thoughts can gravitate more towards your goals than those of other people. So it is important to take time to write down your financial goals and create a plan. External factors will always be there, how we react to these factors is what will set us apart from everyone else. No one can tell you how to spend your money except you. You have worked hard for your money, why not decide how YOU want to spend it.
In order to live below your means, you have to be intimate with your finances.
Mindful/Conscious spending
When you spend consciously, you know exactly what you are going to spend your money on. You create a plan of how you are going to allocate your funds. Where is your money currently going? Are you happy with how you’re spending your money? Do you have a budget?
Many financial gurus talk about cutting back on that latte at Starbucks, that will save you a significant amount of money. And it can. But will that make you happy? When you plan and allocate your expenses, you are able to make a determination of what purchases bring you joy and which ones you can cut out.
For instance, my wife and I used to go to karaoke nights 2-3 times a week and spend on average $150-$200 a week! When we started tracking our finances, it was easy to cut off this expense. As much as we enjoyed karaoke nights, we enjoyed investing more!
This may sound like deprivation to some, but it’s not. I believe making a financial plan will give you the freedom to enjoy the things that you love without the mental stress that comes with not having enough money. You get to spend on things that align with your priorities and values.
Living below your means forces you to know yourself. Your needs and wants become clearer. Spending consciously and less than you earn will propel you forward in this marathon towards financial wellness.