Budget, Erase Debt, and Live Below Your Means

Budgeting helps you to live below your means. But what does living below your means really, well, mean? At the most basic level it means you spend less money than what you make. Or money going out is less than the money coming in. It is that simple. But many, many people do just the opposite by taking out credit cards and loans to buy things they cannot afford. As a result they end up in deep debt.

However, a budget is a tool to help you carefully monitor the money coming in and the money going out. The end result should be that it prevents you from over-spending and allows you to live below your means.

What also gets folks in trouble is not using cash to make purchases. They will whip out the debit card thinking, "hey there is money in my bank account." Little realizing that there are not enough funds to cover all of their impulse buying. But a budget will help in avoiding this situation. By tracking where all of your money is going and planning out how it should be used, it can prevent you from over spending.

The thing about a budget is that you need to constantly update it and massage the numbers. This does not mean you have to cheat and fake the numbers. Nor does it have to be a chore. You could update it once a week. But if at all possible try double-checking it every time money comes in and money goes out. Or preferably before a purchase is made you should consult your budget to determine:

1. Did you budget for it already and so it is already accounted for?

2. If not, then is there wiggle room in the budget to make the purchase?

And you must have the money either already in hand or in your checking account to make the purchase. Do not fool yourself by thinking that you will have the money at the end of the month or next month to cover the cost. This is how we get into debt in the first place. Have cash, make purchase. No cash, no purchase.

By following these simple tips with your budget you will know ahead of time if you can afford something by determining if you have the cash on hand to buy it with the help of your budget. This will prevent you from spending more than you earn. Hopefully you will avoid credit cards going forward. A budget will not physically stop you from whipping out the card. But mentally it can stop you if you let yourself think about it. And then you will truly be living below your means, while you erase debt, and build some wealth.