In today’s world, we’re bombarded with the media, peers, advertisements, and celebrities telling us what we want. A new car. Nicer clothes. A better phone. We’ve become conditioned to chase after money, and I think it’s a condition we need to remedy. You’ve heard money doesn’t buy happiness. It’s true–money is not something that we should chase after. You’ll end up disappointed. No amount will ever be enough.
The cardinal rule of living within your means is spending less than you make. Your income has to be greater than your spending. It’s not a novel concept, but it appears the millions of Americans who are in debt up to their eyeballs have failed to apply a simple math equation to their everyday lives. We live in a society fixated on instant gratification—buy now, pay later. The question we need to ask ourselves is, “At what cost?” If I buy this new HDTV, or new bike that I probably won’t even ride, or state-of-the-art-for-a-day computer, what is it going to cost me when it’s all said and done? Is it worth the debt? Can I bear the cost?
This summer, I’ve really learned the true cost of living on my own. My findings: It’s not cheap. Costs add up quickly, and if I’m not careful, I can easily exceed my income. I’ve been blessed with a great internship that pays me more than I deserve, but that doesn’t mean I can just spend like I have an unlimited cash flow. Before the summer started, I decided to track my spending. I started with a simple spreadsheet, and began listing my costs for food, entertainment, travel, and tithing. When you truly track what you’re spending (and where you’re spending) it’s scary. You won’t like what you see. It’s so easy to spend $5 here and $10 there and not even blink, but little costs add up.
I decided to go back through my spending and mark each expenditure as a need, want, or relational purchase. Needs are obviously the things I can’t go without—groceries, housing, gas, giving, and, well, that’s pretty much it for me. The wants are just about everything else—movie tickets, books, music, clothes. Relational is a category I use to mark down purchases I use to build relationships with people. If I shared a meal with or bought a gift for someone, I chalked it up to this category. I’ll get into this in Part II.
Find your own way to see how you’re spending your money. I’ve found Mint.com is a great way to view your spending, and a lot more intuitive than an Excel spreadsheet. If you’re spending too much, review your purchases and see what you can forgo the next time around. If you’re in debt now, start cutting out small purchases and pay off your bills with the highest interest rates first, even if they aren’t the highest amount. I prefer using credit cards to cash, because it’s easier for me to keep track of what I’m spending, but be careful. I pay my bill off every month, and I don’t buy anything unless I have the money for it in the bank. If you don’t have the money for it, how can you justify buying it? The faster you get out of debt, and keep your income above your spending, the faster you can make an impact on people, as you’ll see in Part II tomorrow…