One of the more extreme studies of personal finance has to be living on half your income. It’s something that takes hard work and discipline, because we’re very accustomed to spending all of our money to live these days. But there are ways to live on half of your income, as long as you’re willing to get creative.
First and foremost, before you do anything else, you should have a strong understanding of what’s really going on. Do you have things in place to budget and save properly? Are your credit cards already paid off, or you’re making significant progress? If you don’t know what’s leaving your house or what’s coming in, it’s going to be next to impossible to live on half of your take home pay.
After you settle these initial questions, you need to think about a goal. It might sound silly to think about a goal when all you really want is to make sure that you’re able to enjoy life a little more, but bear with us here. See, when you set a realistic goal and fulfill it, you start feeling like you can do anything. It’s a great boost to your self esteem and helps you plan for even larger goals. Basically, a little success sets up the scene for even bigger successes later. It just makes sense!
From here, you need to get ruthless about cutting things out. What’s really going to enrich your life, and what’s going to make things more difficult? For example, you might have a lovely flat but it’s costing you a lot of money. How can you reduce the total expense you have for monthly rent? Well, you could get a roommate to share it with you, which would reduce how much you have to spend every month. But that brings up other problems, like having to get along with someone completely new. A good roommate is awesome, but it can also be hard when you’re trying to get things off the ground.
Make sure that you’re looking at focusing on where you spend when it’s time to go out on the town. Do you need to eat out, or can you cook a nice meal at home? If the answer is yes, then you already know what you need to do from this point. It’s time to put things in motion by getting ruthless, as hard as it is to do.
What will you do with the money that you aren’t spending? Having a clear plan to save it will help you stick with it. This is where a lot of people fall off, because they don’t have good savings, and they aren’t sure why they’re saving in the first place. The truth is that emergencies do come up, but that doesn’t mean that you have to pay them with credit. It’s perfectly possible to just handle things with cash from your savings account.
Make sure that you have all insurance policies up to date, and that you’ll still be able to afford them. Even though some people believe that they will be able to cut insurance bills down, this isn’t the case. If something happens to you, you’ll be glad that you were still covered.
Another mistake that people often make, is that they try to do these things all by themselves. When you’re taking on an extreme goal, it never hurts to have someone right next to you that cares about you and wants you to succeed. You get points if you can find someone else that also wants to save half their income and live on the other half.
One final point here is that you don’t have to just focus on reducing expenses, even though this is a pretty important piece of the puzzle. You also want to make sure that you’re thinking about how to raise your income as well. Have you wanted a promotion at work, but you just don’t think that you can do it? Take heart: it’s possible to get promoted sooner or later, as long as you’re bringing a lot of value to the table. The difference between someone that isn’t promoted and someone that is can be summed up with one word: value. If they see that you’re someone that they just can’t live without, they’re much more likely to give you the promotion that you’ve been looking for. Remember that when you do get promoted it’s important that you keep saving. A lot of people use a great time like promotion to justify spending more money, which ultimately leads them away from the goal that they want. Have enough willpower to practice good self discipline. You don’t need to go out and buy a bunch of new stuff.
Could you save money through bartering for different items? If you perform a service that can benefit other people, you could use it to trade for the items that you need. One guy went from a red paper clip all the way up to a house he could live in! It was a wild journey in between, but the point here is that if you have something that other people want, they will certainly make sure that they check out what they can do for you.
There are a lot of steps to take before you just start living on half of your salary. Don’t beat yourself up if it takes you longer; focus on the positive steps here and you’ll be fine!