Just because you can afford it, doesn’t mean you should buy it.Suze Orman
At a time where we can’t know for sure what our future looks like, it has become very important to be prepared for your future financially. Everything is changing so quickly and the idea of having a consistent income, job safety, and future job prospects may be quite doubtful.
The best way to always ensure that you have a financial buffer is ..
you are not gonna like it..
is to live below your means.
This is how the wealth is built, rich people make their money. This is the only way I can think of where you can live comfortably with some financial security, and it will allow you to prepare for times of uncertainty. Remember, you can never outearn bad spending habits.
Here are some strategies that will help you making better financial decisions –
- Stick to a budget – Budget doesn’t have to be super strict and tight. Lets face it if I never had a flat white in the morning and never had take away lunch, I may save $12 on the day but I would constantly be stressed about money, whenever I bought one. Make room in your budget for things you need, have to have, and nice to have, but in moderation. Cutback on things you are okay to live without. Once you make that decision stick to it. Check out my previous blog post on how to plan your finances and on how to manage your monthly expenses.
- Change your mindset – The mindset that budgeting is being restrictive with your money is what holds us back from following one. Change it from ‘restrictive’ to ‘giving you freedom that allows you to do things you love’.
- Monthly subscriptions – This is a huge money drain. Any membership sites that you don’t use routinely (Eg, Netflix, Stan, Hulu, HBO, Disney, Gym, Amazon prime, Costco, Foxtel, Hotstar, I am sure there are more I don’t even know of) are just money out of your bank for no reason. They add up very quickly.
- Mortgage repayments – We are now in the process of buying a house. We made a decision early on of having a hard maximum amount we could afford. That amount was set so out mortgage payments are similar to the rent we pay at the moment. This mortgage payment is going to be around for a major part of out life. Having it at a cost we can afford with our current salaries and still be able to save, travel, and invest in things we love, was important to us. I would not recommend going into massive debt and then start hoping for a promotion to be able to start saving again. Downsize if you have to. You are responsible for your own finances. If you are doing this to impress someone, then remember, they are not going to be coming to pay your mortgage when you can’t.
- Increase your income – If you have time on your side, consider getting a second income to help add some cushion into your savings. Why would you not want an extra $100 per week, right?
We are all in this special time with COVID 19, experiencing new things in our lives for the first time. Even though the chances of this happening again in our lifetime is quite rare, it definitely seems like a good idea to be financially prepared for circumstances such as these.