“Living below your means” – what images pop into your mind when you read that? I’m willing to bet that they are not healthy ones. The current global financial crisis has taught people to question everything they’ve learned about money and their relationship with it. Carrying on with that theme, “living below your means” can now be viewed as – if you can afford a $200 000 home, buy a $150 000 one instead. Henry Ford once said, “Thinking is the hardest work in world, that’s why so few people engage in it”. Changing your mindset and habits is easier said than done for most people. Hopefully you are not one of them. Here are some financial tips for people who are serious about fixing their finances and more importantly, willing to change. 1) Write out a simple financial statement listing your income and expenses. This is obvious and you’ve probably heard it a hundred times before. If billion dollar corporations have one, so should you. Seeing your “money flow” is the starting point. 2) Revising your food budget is the first step. Do you really need to buy “brand name” products? Stores such as Target offer private label brands and have its Redcard program which offers an additional 5% discount. This is a mindset issue, do you still want to be “brand loyal” to those brands that are draining your budget? 3) Next are utility services. Look at the rates from the different utility companies. In a nutshell, they all offer the same service at varying prices. Some utility companies are listed on the stock market and have to make consistent and RISING profits to please shareholders, meaning your interests don’t come first.
4) If you have cable, cancel it. Do you really need it? Do you really need TV at all? Oprah doesn’t even watch TV. The main objective of TV companies is to deliver audiences to advertisers. Time is your most valuable resource, how about spending it other ways such as meaningful time with your family. 5) Making your own meals is easier on your pocket and your body than frequenting restaurants on a regular basis. 6) Dump “brand name” drugs and buy their generic equivalents instead. The active ingredients are the same, just at a cheaper price. 7) Clothing purchases should be kept to a minimum. Take a look at your wardrobe, you probably haven’t used many of the clothes more than twice? Consider buying clothes at off price retailers such as TJ Maxx and Marshalls. 8) Bank charges. Shop around for the cheapest deal. Banks are not loyal to you, why should you be loyal to them? 9) The active ingredients in brand name cosmetics, toiletries, skin care and household products are same as their lower priced cousins. You pay mostly for packaging and branding on “premium” brands. So your money is basically taken (or stolen depending on who you ask) legally from you in three ways: – Taxes – Debt – Inflation To move ahead financially, you must control the above three. On average, employees’ tax rates are higher than the richest people in this country. The tax laws are written in favor of investors and business. Your aim in the long run should be to become an investor. It goes without saying, any surplus from your budget should be directed to paying off credit card and personal loans and then proceeding to finishing off your mortgage. Whilst banks will have you believe that your mortgage loan has the lowest interest rate, when you look over a 20 to 30 year span, you will pay at least twice your original loan amount. Not so small interest rate after all, is it? Debt is a bad word for most people but skilled investors use it wisely in making more money. Having savings in the bank is a great habit but it won’t earn enough to beat inflation which, will skyrocket in the coming years. The best way to beat it is by investing, no one has ever “saved” themselves to riches. Take the example of Warren Buffet, he definitely lives below his means (modestly) but is one of the richest men in the world, because he does what he loves and put his heart and soul into it. Work full time on your income and part time on your fortune.