Sometimes, running out of money before you run out of month isn’t a sign that you don’t have enough money coming in—it’s a sign that you live above your means. How do you know if you’re the type to live above your means?
If you have ever gotten a raise and noticed that you run out of money just as quickly as you did before, you probably live above your means. The good news is that you can learn how to live beneath your means.
The first step to living below your means is completing a completely transparent, honest budget. Make a list of your fixed expenses, including rent, utilities, and other bills.
Then you need to make a list of flexible expenses, including food, gas, grooming, and entertainment money. Write down how much you want to spend in these areas.
Now, it’s time to know how much money you have coming in to cover your various expenses. If you don’t have recent paystubs, you may be able to estimate your income.
Figure out what your gross income is for each pay period. Subtract any insurance, 401k, or flex spending money that comes out before taxes. Multiply the remaining amount .75 to estimate how much money you bring in.
Now here comes the tough part. Track every bit of money you spend for 30 days. Include money spent on debit, credit, and cash. At the end of each week, sort your transactions into the categories you have listed in your budget.
When the end of the month comes, you can go through and see exactly how much money you have spent. You may be surprised to see how much you go over your budget in certain areas.
It’s time to edit your budget. But first, figure out how much money you want to be saving. Whether it’s $200 or $2,000 per month, set up an auto-save payment that comes out of your bank every time you get paid.