Living Within Your Means

Most Americans fall somewhere between the two extremes. The rise of easy credit, interest-only mortgages, and cheap car loans has allowed us to raise our standard of living by borrowing on the future.

Living within their means is a promise many make to themselves but few keep. Deciding you're going to do it will not make it happen. There are steps that need to be taken. Some are easy while others are harder than telling your best friend he has body odor. You don't want to do it, but you know it has to be done.

If there is income coming into the household from more than one source and money exiting through more than one pair of hands, the decision to live within one's means cannot be a solitary decision. All contributors and spenders have to be in agreement or whatever plan you come up with is doomed to failure. Make it a family plan. Work together and your odds of success are higher.

When asked to set goals, most people come up with long term goals like saving for retirement or putting kids through college. While you need these goals, you also need short term goals as well.

My husband and I have set up two goals for 2010. We want to eliminate our charge card debt in 2010 and double the money in our emergency fund. We set up an emergency fund years ago but haven't added to it since. Inflation has eaten away at its purchasing power since then. It no longer offers the security it used to.

A map doesn't do a lost hiker much good if they can't figure out where they are. You need to know what money is coming in and what bills (house payment, car payment, insurance, etc) are non-negotiable.

Many people balk at the idea of setting up a budget, but if you are committed Livng Within Your Means, a budget is essential. It doesn't have to be to the penny to be affective. My husband doesn't need to know that I occasionally indulge in a candy bar during my planning period.

Use your bank statement or receipts to get a fair idea of your average grocery bill and gas totals. If the numbers are unrealistic, it's not going to work.

Look for ways to cut expenses, not just in a few categories, but wherever the possibility exists. Are you willing to eat popcorn while watching TV rather than chips? Do the kids really need to drink all that soda? How about making homemade pizza rather than ordering in on Friday nights? Put extra blankets in the bed and lower the thermostat a couple of degrees at night. Carry your lunch to work... The possibilities are endless.

Set up a plan to reach the goals you set up in Step 1. Now that you have a better picture of where you're at, decide if the goals are realistic. Do they need to be adjusted? If you have $20,000 in charge card debt, clearing it in a year may not be possible. Your goals need to be lofty, but attainable.

To be successful you need to make a plan.