In 2018, The average American household has around $137,000 worth of debt. And yet, the average American household has an income of $59,039. This alone suggests that the average American lives above their means.
Are you living above your means?
As a child my mother would stress constantly the huge mistake many people make by living above their means. She stressed to me that I make sure that I did not make this mistake because of the long-term consequences.
With the cost of living steady rising but the average salary almost stagnant for many, A huge amount of Americans face an overwhelming debt-to-income ratio. And in many cases they notice the bills rise but never adjust their lifestyle to maintain the financial foundation. Many race to borrow from outside sources to maintain their lifestyle rather than evaluating their personal spending habits.
Lets take credit cards for example.
so let’s say your rent has increased, which for many this is inevitable, and honestly for all, this should be expected. When you initially got the apartment you had a little room to eat out , shop frequently and so forth. Now you are faced with a monthly rent increase of $50. And you think, “well I have a credit card for extra room“. And you carry on with the fast food, shopping and etc. Now that $50 has become credit card debt you didn’t not have years prior. And let’s include other credit card charges, like an unexpected car repair. Now monthly interst charges are pouring in, other unexpected expenses. And you are still not meal planning, haven’t stopped buying clothes and can only manage to pay the minimum on your credit card. This small $50 has now become an issue and limits your ability to save. This is a small yet common example of living beyond your means.
Now this is how a successful budgeter would have avoided this...
once the notice of increase in rent was recieved the budgeter would have rebalanced their monthly budget. Starting with revisiting last years budget and recording all monthly increases and decreases. following that step they would have totaled all necessary expenses and subtracted that from their monthly income. This alone would have shown them that a change would have to be made to an expense that can be decreased, ie (shopping, eating out,hair appointments etc). For example let’s say this person gets a manicure / pedicure every 2 weeks averaging $80. They would have either eliminated this expense or decreased the frequency so that the average monthly expense would decrease $50, therefore balancing the budget. This small adjustment would make it less likely that the person would be using their credit card irresponsibly and charging far beyond what they can afford. So simple, yet so effective.
Kommentarer