In the blog “Achieving Financial Independence from Debt,” I talked about the basics of how to achieve financial freedom. Today, I will talk about one of the best things that you can ever do for yourself regardless of your financial situation: live below your means.
Better Risk Management
Living below your means allows you the ability to have extra cash on hand in case anything goes wrong. Sometimes life just happens. You may lose your job, suddenly need car repairs, or have an unexpected medical emergency.
If you live paycheck to paycheck, you’ll have little to no money to cover these extra costs, which can easily send you spiraling into debt.
Invest in the Future
Living below your means is key to reaching financial freedom because it allows you the extra money to prepare for the future. This includes investing, building assets, and saving money for retirement. Being able to have more money means more than simply growing a bank account—it means being able to take that money, invest it, and make it grow for you in the future.
For some, living below your means may seem difficult or even impossible. Here are some general tips to make it easier.
Cut Meaningless Expenses
Some examples of easy spending to cut or lower are:
- Cable/internet packages
- Phone plans
- Gym memberships
- Eating out
Check Rates for Insurance
Switching to a different insurance for your car, home, or whatever else could also help you cut down on some costs. Don’t just pick the first insurance you see without doing some research. Shop around a bit to see if there are any better rates for your different insurance companies.
Ditch the Fancy Neighborhood
In general, your rent/mortgage should not exceed more than ¼ of your monthly income. Do you really need to live in the fancy neighborhood with a huge community pool and exorbitant HOA costs? When choosing where you live, the main necessities to keep in mind are somewhere that is safe, clean, and close enough to your work to cut down on gas if possible.