Some people have high monthly consumption or expenditure levels which cannot be supported by their regular income streams. The people whose regular income falls short of the regular expenditure are said to be living beyond their income. When you live beyond your regular income, you are bound to borrow from financial institutions or friends in order to bridge the gap between your regular income and your high consumption level.
If your consumption level is below your regular income you are said to be living within your income or means. People living within their means will always remain with a surplus income which will enable them to make income earning investments.
Can you avoid living beyond your means?
Yes you can avoid living beyond your income through observing the following among others;
In order to live within your means, you require determination within your mind to always live within your means or income levels. Living within your means is a habit which has to be developed over a period of time until it becomes engraved within your mind. In life you do not have an obligation to consume everything which comes across. For example you do not have to buy a new TV because you have come across a good new TV on the market.
Prepare annual budget
You can only keep your expenditure within a given level if you have levels you have set for yourself. You need to develop the habit of preparing an annual budget funded by your expected regular income. The budgeted income is in accordance with your existing sources of income plus the new ones which are likely to come on board. The budget will guide you throughout the year. You need the strict discipline to live within your budget. You are free to revise your budget in case your income increases or decreases during the course of the year.
Look for opportunities to earn income
Your mind must be open for opportunities of earning extra income to supplement your budget. It is possible to revise expenditure upwards when new sources of income come on board. It is also possible to increase your saving when your revenue increases. The new sources of income could come from business ventures among other things. You can also take on part time jobs.
Borrowing money to meet your high consumption levels makes your delicate situation more difficult. This is so if you happen to be living on a fixed income regime. Borrowing comes with the cost of borrowing which further increases your expenditure. When it comes to business, you can only borrow for a bankable investment venture with defined and certain income stream.
Use of credit card
Be careful as there are organisation like credit card companies which encourage people to borrow to finance the gap between their regular income and high consumption level. The use of credit cards looks cheap but become quite expensive once you get addicted to credit cards.
Avoid competing with others for the sake of it
It is not advisable to incur expenditure because your neighbour or friend has incurred similar expenditure. For example do not buy a four wheel drive vehicle because your neighbours have bought one.
Do not keep so much cash on you
You are mostly likely to buy some items from the market on impulse when you carry excessive on you. I also feel guilty conscious if I decline to help a person because of lack of money when in fact I have cash in my pocket. It is also not advisable to have fully loaded credit or debit cards always in your pocket.
Saving for an item
Some expenditure like buying a car or house may be too big and therefore you may need to save over a long period of time. You are free to open a special bank account for a given item to deposit the savings which has been mobilised towards the procurement of the budgeted item. Do not overstrain yourself in buying expensive assets over a short period of time.
John Muhaise Bikalemesa
Director: Big Drum Advisory Services Limited