Controlling Your Credit: A Guide to Living Beneath Your Means

We work hard for the money, but it seems the second that paycheque goes through- we’re in the 100-meter dash to see how fast we can spend it. Interestingly, it isn’t just the people making less money that are living the paycheque-by-paycheque cycle. This type of spending behaviour is one that seems to cross all salary brackets. Even when one does obtain a raise or bonus, which are often hard to come by, the immediate inclination is to ‘upgrade’ in some way or another. The reality for most of us is that the more money we have, the more frivolous we are. We tend to put a lot of pressure on ourselves to partake in extravagancies we know we can’t afford, the expensive dinners, clothes, that last round of drinks just before closing time. Even though we are usually spending well beyond our means, our psychological need to splurge and consume tends to get the best of us. 

We assume that if we can’t have what everyone else has, or do what everyone else is doing- the only option is to live as a recluse. But the reason we spend isn’t only about feeling at par with everyone else, it’s also about forming our individuality. By purchasing things that reflect who we are and who we want to be, spending becomes a means to our self-creation. But becoming ‘budgetly aware’ and denying ourselves what we can’t afford doesn’t mean dropping out of society or giving up our personhood; it means becoming more in tune with what we actually need, being in touch with what we value most, and learning to live better with less. Gaining financial control and becoming sensible about our perceptions of money can also help us improve our living conditions at a steady pace, and adjust better when we start earning more.

1)    Train Your Brain To Say ‘No’

 
The first step to living beneath your means and thriving is feeling comfortable saying no to unnecessary expenditures. Ask yourself, “Do I absolutely need this?” and “What else could I use the money for?” This will be difficult at first, but it is a learned skill that will require time and practice. Chances are you can always find alternatives to not spending the money and the more accustomed you become to not surrounding yourself with material things, the less you will miss them.

2)    Plan A Realistic Budget

There is no denying that the cost of living is expensive, but it is a fact of life with little way around it. As a first step budget tactic, calculate your average cost per month for bills, tuition, rent, mortgage payments and make sure you always have money set aside to pay them. In order to ensure diligence, set up a separate banking account which withdraws the money for your bills directly. This way, you have no choice but to have money in the account.

Next, write down everything you spend in a given week to see exactly where your money goes. Many people often associate budgeting with some enormous and complicated task, but it really isn’t as time-consuming or difficult as it sounds. It just requires the initial will and effort. And what’s more, once you do it and adjust your lifestyle accordingly, you won’t need to track as closely anymore.

Many budget pros find it useful to make a weekly budget for food, including groceries and eating out. Food is one of our biggest expenses after housing and transportation, so make it a point to cook more of your meals at home and when you do get the urge to go to a restaurant, do a little web research beforehand. You can find tons of restaurant reviews and prices on the web, and you won’t have to compromise taste for value. Bring Your Own Wine restaurants are another great way of not giving up the luxury of wining and dining. Why not avoid the 300 percent mark-ups most restaurants will charge you for a bottle of wine and purchase a nice bottle yourself at the liquor commission before you sit down at a great BYOW. 

 
Last-minute birthday presents, surprise weekend plans- though budgets rarely plan for these, they are often what throw your budget off. Your best bet is to expect the unexpected and set some money aside each week for those potential ‘surprises’.

3)    Create An Account You Can’t Touch

Set up a money-market account, which automatically withdraws $50-$100 out of your account on a weekly or bi-weekly basis. If you can afford more, even better, but for the purpose of limiting your spending and not touching your money, $50 should really be your bear minimum, and the truth is you really won’t know it’s gone. You will need to make an initial deposit, usually anywhere between $500-$1000. Like high interest savings account, money market accounts pay a higher interest and only allow you three to six withdrawals per month. They are safe, feasible and prevent you from spending as you always need to have a minimum amount in the account in order to keep it open. 

4)    Pay Cash Instead Of Credit

When you go out, keep your credit cards at home. The pain of losing cash is one far more immediate and tangible than purchasing something on your credit card. The Journal of Experimental Psychology Applied, published by the American Psychological Association states: “The more transparent the payment outflow, the greater the aversion to spending, or higher the ‘pain of paying’.” The pain of paying reduces the pleasure of buying. Carrying a certain amount of cash once again will limit your spending and force you to think before making any final purchasing decisions.

By becoming more aware of how you spend your money and developing effective strategies for managing and maintaining your planned budget, you will not only avoid financial burden in the future- but help make your life easier overall.