Are You Living Within Your Means? Take 5 Min To Figure It Out

Have you answered the most important question in your personal finances? If not, then you better find out if you are living within your means.

Do you have any idea where to begin? If not, steal important lessons from Corporate America.

Alexandros Chatzidimos via Pexels

Where Do You Begin?

There is no time to waste when answering the most important personal financial question. It is difficult not knowing where to go on your personal financial journey. But please do not let this challenge allow you to put off answering this question.

There is a common starting line for anyone who does not know where to go. Create your own personal income statement to uncover if you are living within your means.

What Does It Mean To Live Within Your Means?

Living within your means is synonymous with a corporation earning a profit. There are two measurements that you need to capture in your personal income statement to understand if you are living within your means:

1. Your Revenue: how much money do you make from your job(s), side hustles, and other gigs? And

2. Your Expenses: how much of that money do you spend?

The key to successfully answering whether you are living within your means is to make the process automatic. Find an app that automatically tracks your cash coming in and cash going out (I personally use Mint by Intuit).

Why Is This The Most Important Personal Financial Question?

Historically it was incredibly difficult for an average Joe to spend money that he/she did not have. However, credit and debt are now widely available to most adults in the United States.

Credit allows you to make otherwise unattainable changes in your life, e.g., purchasing a home. However, the downside is that your fate becomes entangled in paying off this debt for the rest of your life.

The average American currently owes approximately $90,000 in debt. This is an incredible level of debt, and it is the reason why it is so crucial that you live within your means.

Unlike wounds, debt does not get better over time, and it will only get worse the longer you let the infection known as interest accrue.

So, take five minutes to find an app, connect it to your bank account, and then take a look at the math to see if you are living within your means.

Follow Corporate America’s lead and update your personal income statement quarterly. The trend of your lifestyle will become clear the longer you track this information.

Find Your Answer

The answer to this question is the most objective measurement of your lifestyle’s sustainability. The last thing you want to do is change, but it is better to become aware that you are not living within your means before debt overruns your life.

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Please reach out to in50orless@gmail.com with any questions or suggestions for other personal finance topics to cover.

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Matt McDonough

Matt McDonough

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Hello! I am a CPA by day, writer by night, and adventurer on the weekends. I’m on the lookout for fun ideas to read, please send anything interesting my way!