15 Feb Habits for Building Wealth #3
Habit #3: Live Beneath Your Means
Bigger. Better. Hottest. Latest.
Keeping up with the Joneses costs a fortune. You’ll need more money coming in than going out. Otherwise, you’re not building wealth. You’re building a mountain of debt.
Less is More
Spend less, save more. Sounds simple, right?
But the only way to Live Beneath Your Means is to figure out what they are:
- List your last 3 months of expenses.
- Then, ask yourself: Which are NEEDS? Which are WANTS? Sometimes, there may be gray area. (Did that Costco run include needs and wants?)
- Break it down. The more detailed you get, the more power you’ll have to control your spending.
Stress Test Your Finances
Here’s another way to discern the difference between needs and wants. Imagine you just lost your job. If you had to go into financial lockdown mode for 3 months, which bills would you have to pay, which could you eliminate? (dining out and cable, we’re looking at you). It’s a good gauge for living beneath your means. (Spoiler alert: rent is a need, avocado toast is a want)
Paper or Plastic?
You might be thinking, “Traci, I don’t have time to track every little purchase, especially at places like Walgreens or Home Depot, where needs and wants can overlap.”
How about this approach?
- Use 2 credit cards at checkout.
- Put “NEEDS” on Card 1, “WANTS” on Card 2.
- After a few months, your credit card statements will track your spending by category for you.
Cash is King (It’s Good to be King)
Living beneath your means isn’t easy…but it can get easier if you try this eye-opening exercise. Studies show we spend a lot less if we use cash vs. cards. So if swiping leads to splurging, try using cash.
The ultimate goal: by paying attention to where your money goes, you’ll get where you want to go faster – and secure your future. Need more motivation? Click on the link (especially if you’d like to turbo-charge your retirement savings).
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Traci Richmond, CFP® and not necessarily those of RJFS or Raymond James. Raymond James does not provide tax or legal services. Please discuss tax or legal matters with the appropriate professionals. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.