‘Living beneath your means’ has a serious ring to it, but it’s not about going to extremes to save money. Rather, it is about budgeting and spending sensibly to make sure that your future is financially secure and stress-free.
All the answers to your unique business lifestage questions
Most of us spend right up to our limits each month. On pay day we feel like millionaires, but when those debit orders start rolling out, we take a slow stroll back to reality.
To build wealth, there is one simple rule to follow: don’t spend everything you earn. In other words, we have to startliving beneath our means.
Adopting a moderate lifestyle
Sugendhree Reddy, Head of Personal Banking at Standard Bank, says, “The biggest payoff of adopting a moderate lifestyle is peace of mind. People who have plenty of room in their budgets for error, live with far less anxiety than those who go into ‘the red’ each month.”
Planning a budget and sticking to it can help you resist the urge to spend needlessly on impulse buys and things that you don’t really need. The money saved can be used to open a savings account for emergencies or luxuries, or for valuable investment opportunities, such as saving for your retirement.
“Imagine if you were investing R5 000 per month during a 12 month period and earning interest of R2 573 during the year on that investment,” says Reddy, “the financial freedom and security would be incredible!”
Re-organise your finance
It’s also a good idea to regularly relook the organisation of your finances in general; having the wrong type of bank account, not using your own bank’s ATM, doing your banking the traditional way through branches rather than embracing online channels, mismanaging funds, and having inappropriate insurance products can also leak money from your pockets.
It takes time to streamline your finances to ensure every cent is building your financial wealth, but it is time well spent.
The key to living beneath your means lies in deciding what purchases are necessary and which ones are driven by desire. The bottom line is, the more ‘wants’ rather than ‘needs’ that you hold on to, the less financial freedom you will ultimately enjoy.
So how do you step off the spending treadmill? Here are some tips to help you live beneath your means:
- Avoid buying premium brands, especially when the product performs a basic function.
- Taking your own lunch to work can save you thousands in the long-term, and it will be healthier.
- Keep your car as long as you can. Today's cars are built to last well over 200,000 kilometres if serviced regularly.
- Using your credit card can be an effective tool as you get 55 days interest-free, but it needs to be managed carefully and paid in full. Reward yourself for victories. If you settle a debt, treat yourself; living beneath your means is about self-control, but you can still enjoy yourself.
- Keep a money diary. Whenever you spend money, jot down the date, the cost, and the item. You may not capture everything, but it can give you an eye-opening view of where your money goes.
- Using rewards programmes can be very beneficial in the long run. It allows you to get something back and an opportunity to treat yourself for your everyday spending.
- Using online channels is cheaper than going into the bank. Become technology savvy and use your tablet and mobile banking app to do your banking.