LIVE BELOW YOUR MEANS
Seems simple enough doesn't it? This basically means, ensure that your lifestyle costs much less than your true financial wherewithal. Do this for many years and you'll find yourself in a very good position financially.
We often hear the phrase 'Live Below Your Means' espoused by several personal finance pundits but what does this really mean?
Here are some of the most important specifics that I feel define what it is to LIVE BELOW YOUR MEANS:
- Do Not Purchase a Home for Nearly the Amount that your Lender Pre-approves You For. Lenders obviously want you to borrow as much money as you can theoretically handle based on your income. This figure is usually ridiculous when you consider the fact that you do need money for other items aside from your mortgage, property tax and other related home expenses. Write up a monthly budget and actually examine where your money will go in reality before purchasing a new home. You'll find that your lender would like you to lead a house-poor lifestyle of stress and worry.
- Save First, Then Spend. "I would save money but there is nothing left at the end of the month". This is a common excuse. Until you adopt the habit to put money aside as savings before you even think about paying bills or buying things, you'll feel like a hamster on a financial treadmill. Automate this by setting up an automatic money transfer to a separate account and it's fool proof. Save at least 15-20% of your gross income and you'll be well on your way.
- Forget About The Jones'. You might as well face it, your friends and relatives your age will live above their means and you will look poor when compared to them. Until you resign to this fact, you will be extremely tempted to veer off course, following the herd by making irresponsible financial decisions that lead into debt and stress. Let others become house-poor, live paycheque to paycheque, drive overpriced SUVs they can't afford, and take vacations on credit while you manage your finances responsibly by sticking to your plan. Remember, the Canadian banks own the Jones', while you can own the Canadian banks if you choose.
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