Posted on Thursday 22 February 2018
We live in a day and age where materialism has dominated society. Countless people exhaust all financial resources and even go into debt from purchasing large homes, fancy cars, and other tangible items. More often than not, people choose this path in an attempt to impress people and show everyone how well off they are.
In actuality, the wealthiest and most well-off people live below their means. There are several upsides to living below one's means and it's a strategy that all people should adopt if they are truly serious about attaining financial health.
As pointed out by Frugality Magazine, people who live below their means are considerably less likely to incur or retain debt. In order to understand why this is true, people must first understand the nature of debt and how it works.
Debt often occurs when individuals attempt to live above their means, typically by spending more money than they earn. If you earn one million dollars and spend one million dollars, you're still broke. If you earn one million dollars and spend two million dollars, you are officially one million dollars in debt in addition to applicable interest rates. Of course, payday loans are legal and you can borrow funds when you're in need. However, without adequate attention to your earning and expenses, you'll likely still end up in debt.
Living below one's means is the best way to avoid debt if it has not already been incurred. After all, a person who spends less than what they earn will not be forced to borrow money in order to cover expenses. Borrowed money that is not paid back only leads to more financial complications. The interest becomes yet another bill to pay on top of other expenses. In some of the worst-case scenarios, people wind up spending more money on interest rates than they do in paying the original debt. An individual who is meticulous and disciplined enough to live below their means can avoid all of the aforementioned financial hardships. Even more notably, when you're not in debt, you are in a better position to determine the appropriate time to take advantage of the CPP.
Another upside to living below one's means is the ability to put more funds aside towards savings. If you're financially planning to purchase a home, this is something you'll want to consider. Two of the most common financial traps are incurring debt and being hit by unaffordable monetary emergencies, due to one's failure to save efficiently.
Each and every adult should be putting a percentage of their earnings into a savings account each time they get paid. Not only does this cover any unexpected occurrences such as car accidents, theft, or layoffs, but the psychological benefits of having a financial safety net are beneficial as well. You might also want to take up a high-paying job so you can improve your savings. In that case, you'll need to learn the best ways to craft a resume.
Ultimately, an individual who lives below their means is setting themselves up for success. They are also taking the necessary precautions to prevent potential bumps in the road. Living below one's means is not necessarily synonymous with a lack of fulfillment. It simply means earning more than one spends. Avoiding debt and increasing savings are some of the two most critical element of financial success, yet so many people fail to meet them. However, a new decision can always be made. Those who are already living above their means should strive to either decrease their spending, increase their earnings, or both.