By following some simple guidelines, you can learn to live within your paycheck and enjoy a solid, less stressful financial future.
Here are three suggestions to help shift your mindset about money and spending.
Consider Needs vs. Wants
Money is a means to an end. It buys us necessities like food and shelter, and it buys us “stuff.” We think that STUFF makes us happy and that other people love us and want to be around us because of our STUFF. But that’s simply not right. We need to learn to detach from money and see it as a simple mathematical formula…if this is what I earn, then this is what I can spend. Think about an item before you purchase it. Ask yourself, “Do I really need this stuff?”
Mitigate Your Risks
“Live for today, yet plan for tomorrow” is great advice to consider when looking at expenses. For example, when it comes to life insurance, we certainly hope it won’t be needed prematurely, but most people recognize how important it is to address the risks and plan accordingly.
With regard to disability insurance, think of it as “income replacement” insurance. If you depend upon your income, you should have disability insurance in place in case you become disabled and need a “replacement” paycheck to support your family.
And finally, as you start to get closer to retirement age, long-term care insurance can help to supplement your retirement cash flow to meet the additional costs of an extended long-term care event.
Make It a Family Affair
Money consciousness should be a family goal. Create a money-conscious household. Talk with your spouse or partner and family members. Reinforce the message that everyone needs to be careful about spending. Consider instituting a contest where everyone tries to operate within his or her budget or allowance. Suggest a “go-without day” when everyone gives up one of his or her usual items, like the mocha latte or iPhone app download.
It’s important for everyone in the family to understand the reasons for cutting back and the difference it can make in the family’s financial situation. Big savings are important, but it’s often the little things that really add up and can make a huge difference in your budget!