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Living within your means is defined as the amount of income you take in, less your taxes, is the same as the amount of money you need in order to live.
Living beneath your means is defined as the amount of income that you take in, less your taxes, is less than the amount of money you need to live.
If you are good at managing your expenses—spending less than what you bring in—you will find money left over each month, which can be directed to savings or investing. Living beneath your means is one of the most important keys to financial success.
The answer to this is found within your attitudes about money and material goods, and your ability to postpone or do without certain items now, in expectation of getting some future payback as a result of your frugality. For example, you must decide that having a stress-free financial life—by driving a paid-for, ten-year-old car—actually feels better than the stress created by having to pay off a $20,000 loan to finance a brand new car.
You can create an expense budget so you may attain or reach some financial goal in the future, whether to save a certain amount of money for a future purchase, such as a house down payment, educational expense, a vacation, or a large appliance, or to pay down debt.
It is very important to have a goal in mind when you create an expense budget. Visualizing the goal makes it much easier to check your progress toward that goal, and measure your progress, whether positive or negative. Having the end prize in mind—whether an amount, or an actual physical item you would like to purchase— makes the goal more tangible and, in the end, more easily attainable.
A budget is the established limit of the amount of expected expenses during a defined future period.
Setting up a family budget is an important step in keeping expenses under control and staying out of debt.
Zero-based budgeting is a method by which one accounts for the spending of every dollar of income from all sources. If any one category must be revised upward, another must be revised downward so the effect is zero on the total amount that is spent during the budgeting period. This way, your expenses can never exceed your income, if you stick to your budget.
The steps in using a budget are Goal Setting, Budgeting, Analysis, Monitoring Actual Expenses, Improving the Budget, and Adjusting Behavior.
Food (groceries, restaurants); Housing (mortgage/rent, property taxes, insurance, utilities, repairs); Clothing; Transportation (public, fuel, insurance, lease payments, car loan, rental); Health Care (including insurance premiums, co-pays, deductibles, prescriptions); Entertainment; Personal Care; Education; Communications (land line, cell phone, Internet, cable); Computers/Technology; Income Taxes; Pensions/40l(k); After-Tax Investments/Savings; Charity; Life Insurance; Lawn Care; Credit Card Debt; Other Loan Payments; Hair/Salon; and Travel.