Prevent Debt by Living Below Your Means

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The common tendency is to spend at or above the level of income that you are currently earning. This financial lifestyle causes many individual. s to live paycheck to paycheck, often accruing large levels of debt along the way. Common sense would dictate that an individual would become more financially stable if he began receiving a greater income. After all, this would allow him to meet his expenses and begin to pay down his debt. Unfortunately, common sense does not always prevail in these situations. In many cases when a person receives an increase in income, he begins to spend more money. He uses the pay raise as an excuse to get a new car, a bigger house, or a nice vacation. The net result is that he is still living paycheck to paycheck and accumulating debt. The old cliché is often true; the more you make the more you spend. So what is the solution? People need to learn how to live below their means.

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It is not enough to live within your means. This simply means that your income is covering your expenses. However, this typically leaves no money left over to go towards emergency savings or a retirement account. If an emergency occurs, the individual often has little choice but to turn to credit for help. This is a sure fire way to accumulate debt in a hurry. The key is to live BELOW your means. This certainly does not mean that a person needs to live in squalor, but it is important to spend less than you make. The sum difference goes into savings to cover your financial future. Some folks think that this is a real nice idea, but they find it very difficult to actually put into practice. With that in mind, we would like to present some practical tips for living below your means.

• Create a budget. This is an essential building block for all aspects of financial health. This will help a person determine how much they can afford to spend and how much needs to be saved in order to meet or exceed their goals.
• Determine wants from needs. It is imperative to realize that needs have to be met but wants do not. An individual should make sure his wants are in line with his budget.
• Accountability. Appoint a trusted friend or relative as a financial accountability partner. Their job is to hold your feet to the flames regarding spending habits and patterns of savings.
• Be selective. This relates to purchasing decisions. There are all kinds of ways to save money, such as: buying off brands, using coupons, comparing prices, shopping sales, etc. Over time, selective shopping can save thousands of dollars which can be used to pay down debts or go towards savings.

Save money off the top. Take a percentage of your paycheck and place it into an investment vehicle each month (or week). If you wait until the end of the month to place money into savings, you will often find that there is nothing left.

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.