Planning out a budget.

Live Comfortably On Any Salary

Can you live comfortably on any salary? It might seem difficult, but yes you can. You just need to follow a few simple rules and have a bit of discipline. Here is what you need to do to make your salary work for you.

Don’t Live Beyond Your Means

This is key to living on any salary. You need to stick to buying only what you can afford. This means not charging purchases or accepting payment plans. If you can not afford to pay for something in cash, it is probably a purchase that you should not be making. Continually putting every day expenses on credit will always catch up to you in the end.

Living within your means starts with two major expenses that tend to get people in trouble. Housing and transportation. You need to choose a home that is priced within your budget and do not overspend on a car. With the way auto finance departments throw money around, this can be difficult which is where discipline comes in.

But how do you decide what is and is not within your means? You turn to a budget.

Start A Budget

Your budget will be your road map for spending and it will help get you out of trouble. Don’t be intimidated though, because it does not have to be anything fancy. Your budget just needs to show you where your money is going. Preferably you will put everything into a simple spreadsheet that will allow you to make changes quickly. There are simple budget templates all over the internet, so just grab one.

To begin breaking down your expenses, start with savings. You should be saving at least 10 percent of your take home pay, so be sure to pay yourself first. Then add your rent/mortgage, utilities, car payment and allotments for food, entertainment, etc. When you are done, you will have a map to where your money is going and you might also have a problem.

If your find that your expenses are higher than your income, it means you are probably living off of credit or at least living paycheck to paycheck. Neither is a good thing, but your budget gives you the tool you need to balance your expenses with your income. Sit down and make changes until everything is balanced. This might mean making some big changes or sacrifices, but it will be worth it. Just do not sacrifice the savings portion of your budget. But why is saving so important?

Save For Bad Times

In everyone’s life, there will always be a bad time and it will typically revolves around money. It could be an unexpected medical bill or a loss of a job or one of a million other things. What is for sure though is that it will take money to resolve.

This is why it is so important to save at least 10 percent of your take home pay. It will allow you to roll with the financial punches and not fall apart over something as simple as a 400 dollar auto repair bill.

When saving money, be sure to do so the smart way. Open an online savings account that is with a different bank than your primary checking and set up automatic deposits. By having an account at a different bank you prevent immediate transfers which may stop you from impulse spending. Automatic transfers keeps the savings building and you can put the money completely out of your head.

Eliminate High Interest Debt

With that budget in front of you, wasted money will be staring you in the face. One of the biggest wastes of money is high interest credit card debt. If you carry the average debt load of a typical American, you are probably spending 200 to 300 dollars in cash a month just on minimum payments.

Make a plan to eliminate this debt.

One of the most popular plans is the debt snowball reduction method. The idea with this plan is to motivate yourself to continue paying down credit cards by paying off the smallest one first. Since you will be able to eliminate the debt on this card quickly, you will be encouraged to continue. To use this method, simply make the minimum payments on all but the smallest balance card. On this card, pay as much as you can. When the card is paid in full, move to the next lowest balance.

The next most popular plan is the debt avalanche method. This method uses logic to pay off the card with the highest interest. In this way you maximize your interest savings. To use this method, pay as much as you can on the highest interest card while paying the minimum on the others. Once the card is paid off, move to the next card with the highest rate.

Improve Yourself

You will likely find it hard to stick to your budget, which is why you should always be looking for ways to improve your financial situation.

If you can take a class to improve your training, do so. Would learning another language improve your income opportunities? Start studying. By acting now to improve your skills, there will be a time when you can increase your spending and find the money you really need to start living better. If nothing else, the possibility of a brighter future will motivate you to continue with your budget and make you a devoted planner.

Being devoted to that budget will help you avoid one less pitfall, lifestyle creep.

Avoid Lifestyle Creep

Lifestyle creep is the tendency to slowly spend more and more. You get a raise at work, so you treat yourself to a nicer car or start going out to dinner more often. You might live a little better, but you really gain nothing from the extra money and might even start overspending again.

It is okay to treat yourself when money finds its way to you, but you need to use extra money responsibly. Instead of blowing all of your added income, invest or save the majority of it. Take it as an opportunity to make your life a little better now and a lot better in the future.

Posted by
James Car

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.