What does it take to live within your means? Why do some households manage their finances effectively while other people wonder where their money went long before their next pay check? The answer to this is three-fold: some households are better at living within their means because they have a frugal mind-set, they earn enough to support themselves and they are better at cutting back on unnecessary expenses and know how to save and budget effectively. Obviously it’s important to have enough income to support a household, but it’s just as important to have the right mind-set and skills.
South Africans are notoriously bad at saving and are big fans of store accounts. Taking on credit on a small scale might not seem like a major financial responsibility, but they add up and that’s how many consumers who apply for debt counselling find themselves in the situation where their debt repayments are more than half of their income. To avoid this happening to you, don’t take on debt unless you absolutely have to. You don’t need the brand new car or bedroom set, a clothing store account or DSTV to have a happy, well-rounded life.
South Africans are also big fans of microloans and these might not seem like a big threat on their own, but every repayment towards a loan means less money towards your living expenses and savings. By saving or investing you are instead paying yourself because your money earns interest and people who manage their finances well know this: they will rather save for something than apply for a loan and make a creditor rich.
Having a savings fund can also be a great safety net when you run into financial trouble or an emergency comes up and you need money fast. Ordinarily people who don’t have savings would take out quick loans, sometimes with very high interest, to see them through to their next pay check. People who are used to saving also service their debt much more effectively when they do take out loans. Instead of saving, they put that money towards servicing their debt and don’t feel the tightening of their budget like those who are more inclined to live beyond their means.
Living within your means is a team effort for families. Parents have to set boundaries for their children and teach them about saving. If you have a spouse or partner, you both have to be willing to stick to a budget and agree on the best ways to spend the money you make. We sometimes feel that people spend their money in a way we wouldn’t, but don’t let this cause friction between you if your partner is sticking to the budget. Rather worry about contributing to a savings account, servicing debt and planning for your kids’ future. It’s more about making sure that your priorities are in line than checking up on each other all the time.
We are living in a consumer culture where the things we have are more important than having a safety net, saving for your kids’ futures or planning for your own retirement. It’s fine to spoil yourself once in a while, but don’t let your lifestyle dictate your quality of life. If you try and buy a better lifestyle all the time, chances are, you will find yourself in way over your head with the first financial speed bump. People who are good at saving know that their quality of life depends on much more than the things they own and the services they have access to.