Last Updated on July 12, 2018 by Izza of SavingsPinayPH
Lifestyle traps
The trap of lifestyle inflation is the biggest and least obvious one to spot and dealing with it is essential whether you earn a lot or less. The trend for most people is to spend a little more as their pay grades go up, rationalizing that it’s fine since they can afford it. There’s a difference between being actually able to afford it, and playing at being able to afford it.
Know your net worth
Figuring out your net worth will give you a better understanding of how your finances are working for you. While your annual salary is a figure on its own, you’ll have to include other income streams in order to get your total net worth.
- Add your: Savings + Retirement Accounts + Investments + Any Real Estate + Other Income Streams
- Add together any outstanding debts you might have together. This includes constant bills, like credit card bills, insurance payments, loan payments and the like.
- The sum from your debts must be subtracted from the sum of your total assets. If the result is negative, then at least according to Burn’s guide, you’re living well beyond your means.
Cash is king
The thing about living on a credit card is that it’d be all too easy for you to rack up debt. Living completely on cash, or a debit card, ensures that you can only spend what you actually have.
Success is relative
A lot of things can define success, and much of it is just as subjective as the means you use to attain it. A large part of considering yourself successful comes from what you deem as the most important wants and needs in your life.
Overall
Being able to live solidly within your means carries with it an understanding that there’s a time and place for spending your hard-earned cash, and a time for conserving and saving for whatever future goals you have.
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