With rising prices ,ever increasing consumer wants, and it becomes more challenging for many individuals to live below their means. Credit card bills, keeping up with the Joneses, and other unnecessary expenses are among some of the reasons many individuals find it exceedingly hard to live below their means, finding themselves unable to spend less than the amount of money they are able to make each month.
Using a credit card could be a step backwards due to significant charges that can be incurred for monthly payments as well as late payments. Also, credit card companies can decrease credit card limits or close credit cards without warning. This could spell bad news for individuals eno use their credit cards to pay for debts. In some cases, debit should be avoided in order to live below one’s means. There are of course, certain situations where one may benefit from financing while also having cash to make a payment.
Cards with 0 percent APRs allow for 0 percent interest rate for six months to a year. Unfortunately,are not always easily available. With enough cash to make a payment, the risks of late payments and associated charges may be significantly low. Card holders would do well to pay the minimum and balance on their card before the rate expires.
Deffered payments may be offered by stores for consumer goods. Deferred payments allow for instalment payments instead of a full payment in the first instance. Instead of paying the full amount for a good, an individual can invest the amount they would have paid in cash for their purchase in a high yield investment. Individuals that do take this course of action have to remain aware of the costs associated with late payment of goods that are offered. Financing a purchase even when cash has to be paid for it can benefit an individual’s credit score but emergency payments could result in unexpected default and other related risks materialising.
Taking account of fundamentals, i.e. proportion of income being spent, helps to manage debt expenses. No more than 50 percent of take home pay should be used for expenses. 30 percent of take-home pay should be used for savings. Only 20 percent of take home pay should be spent on extra expenses such as smartphones, entertainment, dining out, home services, and vacations.
Housing expenses should not cost more than 20 – 25 percent of take-home pay. Housing expenses may include mortgages, rent, taxes, maintenance, and utilities. Finding ways to reduce such expenses can be done by acquiring better knowledge of alternative prices offered by other suppliers of goods and services associated with living expenses.
Tracing historical spending can go a long way in building a sense of accountability with respect to expenses. Tracing expenses reveals more about one’s spending habits, allowing for continuous changes to be made and monitored over time. A spreadsheet helps to take keep records of spending habits for future references. It can be used to plan for future spending activities.