To live within your means is to spend less than you earn each month. It sounds like a simple theory, but for many South Africans, getting to the end of the month purely on the money coming in – without relying on credit cards, an overdraft or savings – is hard. However, relying on credit to get you to the end of the month isn’t sustainable and when it dries up, the financial situation can be worse. You could find yourself struggling to get out of debt.

If this sounds like your situation, don’t despair. It’s not too late to change the way you spend your money. Here are 6 tips that can help you reduce your spending and stop living above your means.

1. Know your income and expenses

How much do you have coming in and going out each month? Make a list of all incoming cash, whether it’s a salary, a side hustle, rent from a property, etc. Then, list all your fixed expenses – these are the set amounts that come off every month, such as rent, bond payments, car repayments, insurance and pension. Once you have made this list there should be an amount left over that is for all fluctuating expenses, such as groceries, entertainment, petrol and day-to-day expenses.

2. Divide whatever is left over for the month

Now you know how much you have left, you can plan your spending accordingly. If you don’t already have a budget, put a simple one together that will help you plan and keep your spending on track throughout the month. You can also try a method called ‘backwards budgeting’ to get a better idea of where you stand – write down your income, then subtract your expenses. If you end up with a negative number, then you are living beyond your means and it’s time to cut back. 

3. Don’t compare your lifestyle to others’

When you look at how other people live, how they spend their money, the types of holidays they go on and the cars they drive, it can be frustrating. However, the truth is you may not know their actual financial status and the stress of trying to ‘keep up’ can lead to financial ruin. It’s not worth it. Credit cards and overdrafts can fake wealth for a short while but, eventually, they run out and you are left with the pressure of having to pay back all the credit, with interest.

4. Save for extras rather than use credit

If you can’t afford to pay for a large, expensive item, instead of putting it on credit, just save up for it. Chances are that in a few months, or when you have the money, you might have realised that you don’t need the item after all.

5. Cut down on expenses

If you are not making ends meet, then it’s time to carefully look through your expenses and see what you can cut or reduce. Whether it’s that gym membership you hardly use or DStv, or regular visits to the salon. It doesn’t have to be a permanent change, but saving those little amounts for a period of time can help you get back on your feet and reduce your monthly debt.

6. Save up for an emergency fund

An emergency fund can be anything between 3 and 6 months’ worth of expenses, which is put away in a separate savings account for emergencies. If you have this money saved, you can avoid reaching for the credit card when unexpected expenses arise. Because life often throws curveballs, it’s good to be prepared. Start putting money aside now and be strict about not using it for anything other than emergencies.

The information contained in this article is for information purposes only and does not constitute professional advice.

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