Living Within Your Means – As A Young Person
Living within your means is one of the better financial decisions young people who are in full time employment can make. This simply means not maxing out credit cards, taking out nunnery loans, using overdraft facilities and paying bills as they come in, while also saving away into your nest egg to cover any unforeseen circumstances down the line.
Budgeting – the pros and cons
The prospect of living below your means can be a challenge when you are young. If you have just graduated, then there’s a high possibility that your first job will be the lowest-paying job in your whole life.
It may be a touch challenge to make that first starting salary meet all living expenses, and even more so if you are carrying debt from university/college. And it is difficult to resist urges to spend your money and live the high life if some of your friends may be.
Conversely, when you are young, you also do have lower and fewer expenses as you are probably only looking after yourself. Typically, people in their thirties to forties are most likely to settle, purchase a home, and have children, all of which can rapidly absorb money.
On average, the annual costs of raising a child are in the region of $12,000 to $14,000. This would include child care costs, feeding them, housing and transportation costs also. These are all expenses that you, fortunately, wouldn’t have as a young person.
It is for this reason that many financial planners would recommend that the best time to start saving is in your youth. Sure, trying to live on low starting salaries without credit cards and loans isn’t the easiest of feats.
It might mean having to move home with family for a couple of years or having to share a small apartment with a stranger or indeed putting a limit on your entertainment and dining expenses. On a positive note, it could also mean that you enter your thirties with money banked, rather than the burden of card debt or loans.
Some tips to make saving a little easier
- Set yourself goals so it is easier to stay motivated. Have something specific to work towards. When you keep that goal in mind it eases the pain of saying no to passing luxuries like $15 cocktails and designer clothes.
- Automate your savings. Have a percentage of each paycheck sent directly to a savings account, separate from your main day-to-day account. Keeping your money less accessible, makes it much harder use on a whim.
- Have a budget. Work out how much your monthly expenses are, food, rent etc. Then keep an eye on these expenses to ensure you are within their limits.
- Keep those expenses low. After making your budget, be creative in ways to cut back in each category. For example, you could cut back on food by home-cooking and maybe start to shop in thrift stores to reduce your clothes budget. You don’t need to give up everything, just find ways to do them cheaper.