Living within our means seems like a given. We all know the horror stories of debt, repossession, declined cards, etc. Yet “47% of Americans would struggle to come up with $400 to cover an unplanned expense.” Those within this percentage of struggling Americans may also find a correlation between mental and monetary stress. Research published in 2017 discovered “significant relations among financial stress, interpersonal stress, and psychological distress and well-being, and complex relationships between these variables and inflammatory markers.” Buying whatever you like might make you feel good for a time, but when that spending goes beyond what you can afford it starts to drain your mental health. Financial trouble is all too common, but some people stave off financial issues by living within their means. The American Bankers Association (ABA) quotes a 2018 study that queried Americans and found “Two-thirds—66.1%– said that they were able to pay their bills on time.” Here’s how to make sure you’re one of them:
1. Ask For Help
The first step in adjusting your lifestyle to match your income is to ask for help, even if you’re adjusting to a larger income. According to a survey conducted in 2019, “65% of women and 52% of men said that financial matters cause them the most stress.” The survey also published results showing, “More than a quarter of Americans (28%) said that financial anxiety makes them feel depressed at least monthly, with 17% suffering depression as often as weekly, daily, and even hourly.” Though many people are suffering from or have suffered from financial stress, another survey found, “Respondents are most likely to disclose their income (39 percent) over savings (30 percent) or debt (29 percent) to family and friends.” Those living paycheck to paycheck or struggling with debt can bring up feelings of shame due to perceived inadequacy. The Balance attributes a “keeping up with the Joneses” mentality—the desire to flaunt the privileges of wealth to gain social standing—to some incurred debt. Once free-spending turns to debt, however, many people are too ashamed to be honest about their situation. A therapist can help address depression, a professional coach can help you create financial goals and change behaviors that are getting in the way of your success.
Budgeting is important to living based on your income. If you don’t have a budget, you could be living outside of your means without even realizing it. You could hire a personal accountant, a Certified Public Account (CPA), or a bookkeeper. Having a professional handle your finances gives you the benefit of someone balancing your accounts with an objective eye who is also familiar with income tax laws. However, many people choose to create their own budget with a common formula, like the 50-30-20 rule: “The 50-30-20 rule is 50% of your income for necessities, like housing and bills; 30% for wants, like dining or entertainment; and 20% for financial goals, like paying off debt or saving for retirement.” The best budget overall is the budget that works best for you, but it is imperative that you’re honest with the differences between what is a want and what is a need in regards to your financial situation. Mint—the money management app from Intuit—agrees, saying, “If you see something you want to buy but don’t think you absolutely need, wait 48 hours before buying it. You might find that, more often than not, you change your mind.” Consumerism and instant gratification is fun until it starts to pile up in debt. Notice that the 50-30-20 rule includes spending money, it’s just a lower percentage than that spent on necessities! Budgeting gives you the freedom of mind to spend what you’ve already determined to spend as you live comfortably within your means.
3. Save More Money
One major indicator that you’re not living within your means is a lack of savings. Even if you are saving some money, “If you are saving less than 5% of your gross income, you’re probably in over your head.” Savings are important for emergencies, unexpected expenses like car trouble, and retirement. Again budgeting can help with increasing savings as it helps to pinpoint areas of unnecessary overspending. For example, perhaps you don’t need to run through the Starbucks drive-through every morning. Instead, you could save up for your own espresso machine, saving time and gas money. Also, according to The Balance, saving for big expenses instead of making purchases on credit is another step in the direction of better financial health. The Balance also says saving for emergencies can start small: “An emergency fund of three to six months of living expenses is ideal, but starting out with $100 to $200 will help with some of the minor emergencies from time to time.” You don’t have to be a miserable penny pincher to fill your savings account and live within your means, but if you track your expenses and start to save more than you spend you will positively affect your long-term finances.
Everyone can benefit from making sure they’re living within their means; from the founder of a grassroots small business to the CEO of a Fortune 500 company. Adjusting your living to match your income might sound daunting at first, but eventually, with practice and structure, it becomes a sustainable way to enjoy your income to the fullest.