How to Live on 80 of your Income

Believe it or not it is possible to live within your means. It is possible to live on 80% or less of your income, depending on what your income is. Most of the ideas to keep you within your budget are not new and are things you have probably already heard. But, just in case you haven’t, the following is a list of ways to cut your monthly spending and put away a substantial portion of your monthly income.

Pay yourself first. This is not a new idea.  It’s been kicking around for a while. You may wonder how it is possible to set any money aside. The idea is that you pay yourself every month just as you would pay a bill. You must pay it. Put the money into a savings account. The money in this account is off limits.  No exceptions.

Re-evaluate your living situation.  How much of your income goes into rent or a mortgage?  If the answer is, “too much,” then it may be time to consider a change. How big is your place? How much of that space do you actually use? If you find that you are using rooms of your house for storage rather than living consider having a garage sale or making a donation to a thrift store to clear out unnecessary items. Then look at the possibility of getting a smaller place. 

You might also consider factors such as distance from work, availability of transportation and shopping. How much are you spending on upkeep, maintenance and homeowners association fees. Consider all the fees associated with your living arrangement. Could you do better? Reduce utilities when possible. Low flow shower heads and toilets, compact florescent bulbs and lowering the heat even by 5 degrees in the winter can make a difference in energy costs. 

Also, did you know that appliances continue to leach electricity passively from outlets even when not in use? Consider getting a power strip to plug appliances into.  When the appliances are not in use, turn the power strip off. Speaking of utilities, how many phones do you have?  How many do you need? Can you consolidate? Can you get a better plan?  If you only use your cell for emergencies, consider a pay-as-you-go cell phone rather than tying yourself into a two year agreement and having to pay for the phone every month. 

Television is another thing that is not necessary for existence, however nice it maybe to have.  Rather than subscribing to cable, satellite or direct TV, why not investigate the entertainment possibilities of your home computer? Hulu offers many of your favorite programs for free.  You could also stream movies over your computer or borrow them free from your local library.  Other entertainment possibilities include reading, family/friend game night, take a walk, investigate local free entertainment such as concerts at the park, join a club or organization dedicated to one of your interests.

Entire books have been written on how to reduce your grocery bill, but here are a few highlights. If you are simply not going to settle for less than name brand, join a coupon site or clip coupons from the paper. Some stores accept double coupons. If you are willing to purchase generics then look into shopping at discount food stores. These are stores that exchange offering a wide variety of brands for offering deep discounts. When you go grocery shopping take a list and do not go on an empty stomach. Not following either of these rules can cause you to spend more money than you had planned.  Also, purchase ingredients for making your own meals. Prepared foods are more expensive and generally have more calories to boot.

Do you really need a car?  If you live in a larger city where public transit is abundant then owning a car may be more trouble than it’s worth.  If you live where you do need a car, maintain it well. Maintenance is usually less expensive than repairs. Also, evaluate your insurance. If your car is older, do you really need full coverage? If you are purchasing a car consider buying a decent used car and paying cash for it rather than buying new and having it depreciate the moment you drive it off the lot. If you live near co-workers, start a car pool.  At the end of the day, that’s fewer miles and less gas for everyone’s vehicles.

Consider daily habits that are unnecessary such as the proverbial “Latte habit.”  If you must have coffee, make it at home and bring a thermos to work. The same goes for meals. Prepare them at home. Brown bag your lunches and do not visit the drive-thru on your way home. Are you able to work from home even if it is just part of the time?  Doing so may cut down on expenses such as commuting costs, clothing and food.

Avoid debt and pay off any outstanding debts that you may have. This includes credit cards and consumer loans.  How much are you spending on debt payments? That is how much more money you will have every month once you pay those debts off. Have an emergency fund. Initially this should be about $1000. After paying off your debts then your emergency fund should grow to include three to six months’ worth of expenses. This emergency fund should be separate from your retirement savings. The purpose of this fund is to be there in the event of an emergency so that you do not have to go into debt or throw your whole budget out the window when emergencies arise.

A careful consideration of your finances is often the best way to start a new budgeting system. It is possible to live within your means and set aside a significant portion of your monthly income without feeling deprived.  Even more, doing so provides the comfort of security and the pride of knowing that you are prepared for tougher times should they ever come about.