Living Within Your Means (3 Minute Debt Break)

2023-04-03

schedule3 minute read

Lifestyle Debt

Living beyond our means can lead to financial disaster. The increasing accessibility of credit cards and online banking makes it easier than ever to overspend. Rising costs of goods and social media pressures to keep up appearances can make it worse. To avoid this, you must spend less than you earn, which is “living within your means”.

Young professional looking over his options

A simple exercise to determine whether you're living within your means is just examining your accounts. Create a list or spreadsheet with columns for income, expenses, and the difference. Download all your online banking and credit card statements from the last six months, and then add up your deposits and withdrawals. Subtract the expenses from the income each month to determine where you are at with your spending.

People overspend not only because of careless or uncontrollable spending but also due to housing costs, food expenses, and unplanned costs. Experts recommend keeping housing costs below 30% of gross income to remain affordable. Food is another unavoidable cost that can sidetrack your monthly spending and an important one to track. 

Creating a budget and sticking to it is crucial to consistently live within your means. The 50/20/30 method is an excellent starting point. Look through your last six months of bank and credit card statements, note how much you earned, and sort your spending into living expenses, discretionary spending, and savings. Living expenses should cover 50% of monthly income… discretionary spending 30%... and savings 20%. If you spend more than the recommended amount determine why and adjust accordingly.

To live within your means, you must be mindful of your spending and make a conscious effort to avoid overspending. Planning ahead and creating a budget can help manage your expenses, and sticking to your budget can prevent you from over spending on any given month. By taking the necessary steps to manage your finances, you can ensure you always live within your means and avoid the pitfalls of overspending.

If debt has made it all but impossible to live within your means, there is help available. MNP Licensed Insolvency Trustees offer Free Confidential Consultations to review your entire financial situation and discuss options to get the financial fresh start you deserve. 

If you qualify for a Bankruptcy or Consumer Proposal, both options can significantly reduce your monthly costs and provide a clear path to permanent debt relief. Throughout either process, you’ll also gain helpful guidance on creating a budget, prioritizing your spending, and building responsible credit habits. 
Most importantly you’ll benefit from the support and guidance of a qualified and compassionate professional who understands your situation and wants to see you succeed.

 

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