What does it mean to “live within your means”? Does that mean to spend what you can afford, or does that mean to leverage your income in such a way that it is supported by your financial endeavors? The definition, of course, is entirely subjective, but that doesn’t mean that you can’t “live within your means” and still achieve your financial goals.
I’ve talked a lot about goal setting and its importance regarding your business, and though I’ve focused primarily on setting daily, weekly, and monthly goals, having proper financial goals is important in giving you a baseline that you want to accomplish. In my case, my first financial goal was replacing my offline income of the time, which was around $2,400 a month, with my online affiliate marketing income. I set a timeline (two months) and established how I was going to do it.
Once I started earning an income and had successfully met my initial financial goals I drastically changed the way that I lived. The first things that I did was find a way to reduce my cost of living- I lowered my credit card debts, paid off my car, and reduced my expenses to the point where I was comfortably living off of $1,300 a month, with all of my expenses included in that figure. It’s amazing how a $300 car payment and $400 worth of credit card payments can really take a chunk off of your monthly income.
It’s About Surviving and Saving… For Now
No one wants to save every penny that they make, and trust me, I’m no exception to that rule. However, it’s important that you build your nest egg - the safety net that will keep you and financial ruin apart from each other - and that you grow the amount of cash that you have on hand to make purchases or investments.
My income on the internet went from $2,400 a month to $4,000 a month quite quickly, I soon found myself with a $2,700 a month surplus. This made achieving my next set of financial goals, which was to have $12,000 saved in my savings account, much easier. At the rate that I was saving it took me less than five months.
The reason that you are saving is so that when you start to make investments, be they via internet businesses or traditional investments, you are going to want to have something to fall back on. No one wants to starve, and no one wants to have to figure out how to make ends meet either. Every major financial adviser will tell you to save some money, so cut down on your McDonald’s intake and do it!
In reality, reaching your financial goals can be done in five simple steps, regardless of how much debt you have hanging over your head or how low your income is:
- Set reasonable financial goals - Determine what you realistically can and cannot accomplish. A 21 year old student will have a hard time saving $1,000 a month while attending university, but they may be able to save $100 a month. Conversely, a family of five may have a hard time finding any wiggle room in their budget at all.
- Determine how to reduce your expenses -This may become long term or it may only be temporary- it depends on how long you’re willing to keep this up. Cut costs by reducing some luxuries, driving less, and carpooling whenever possible. Stop buying brand name soaps or tissue paper, or cut down on how much you use.Whatever way that you can think of to shave 10% off of your monthly expenses is what you should do.
- Eliminate your debt - High interest loans and credit cards are killing you. Consider consolidation if you can get a low interest rate, and pay down your credit cards as soon as possible. Take the money that you’re saving from reducing your expenses and pay down your debts. There’s no need to go out and buy things that you don’t need until your debts have been cleared.Imagine how much easier life would be if you knew that you got to keep every dollar that you earned- having no debt means that your money becomes your money.
- Supplement your income - Many people are doing this online (as I did), but there are limitless ways for you to develop a side income. Be it babysitting, lawn cutting, driveway sealing, internet marketing, house cleaning, or whatever else you can think of, being able to make an extra $150-$200 a week will really help your finances.Any money that you earn on top of your regular income is not bonus money- at least, not while you’re still in debt. Either save that money, or use it to pay off your debts. Regardless of what you do with it, the focus here is the long term, not today’s satisfaction.
- Learn from previous mistakes - This will keep you from making them again.
At the end of the day the ultimate goal is to make more than you spend, save what you can, and pay down whatever debts you carry. Though you may need to go on a tight budget to pay off your current debts, once they are cleared you can go back to relaxing and enjoying life. Only, this time, you won’t have to worry about a car payment or credit card bill.
For that reason, living within your means and simple expanding your means should be one of your top financial goals.
