Are You Living Within Your Means?

Understanding Your Financial Boundaries: Living Within Your Means

In a world where economic fluctuations, rising costs of goods, and an increasingly consumer-driven culture are the norms, it is critical to ask ourselves, Are you living within your means? This question not only probes our financial habits but also challenges us to evaluate our lifestyle choices and financial management.

Interpreting “Living Within Your Means”

If you’re wondering “Are you living within your means?”, it’s important to understand what it means. Essentially, it refers to your capacity to manage your expenses within the scope of your monthly income. If you’re spending more than you’re earning, you’re living beyond your means, which could lead to financial distress.


Pro Tip: Regularly track your income and expenditure to understand your financial habits.


Analyzing Your Income and Expenditure Pattern

Assessing your financial habits can be done through an easy exercise.

Here’s how:


  • Prepare a table with six columns representing each of the last six months and three rows denoting income, expenses, and the difference.
  • Gather your online banking and credit card statements for the last six months.
  • Calculate your total deposits (income) and withdrawals (expenses) for each month and record them in your table.
  • Subtract your monthly expenses from your monthly income. A positive result indicates you were living within your means for that month.
  • Add up the differences for the six months to understand your overall financial performance.

By the end of this exercise, you should have a clear understanding of where your finances stand.

Factors Influencing Your Financial Balance

Living beyond one’s means is often attributed to reckless spending, but various other factors contribute to this tendency. Let’s delve into three major factors:

Accommodation Costs

Considered the largest monthly expense, housing costs often consume up to 30% of income. Skyrocketing real estate prices can significantly impact your ability to live within your means.

Food Expenses

Another unavoidable cost is food. Regular grocery shopping, occasional take-outs, and restaurant visits can quickly escalate your monthly expenditure.

Unexpected Expenditure

Unforeseen expenses such as auto repairs, renewing registrations, or even a forgotten birthday gift can push your budget beyond its limits.

Strategies to Keep Within Your Means

Living within your means requires careful planning and disciplined spending. Here are some tips:


Creating and adhering to a budget is fundamental. You can use a simple method known as the 50/20/30 rule:

Living expenses (50%):
This includes rent, utilities, groceries, insurance, and more.

Discretionary spending (30%):
These are non-essential expenses such as dining out, shopping, vacations, etc.

Savings (20%):
Money set aside for future needs.

After calculating these categories, assess if you’re overspending in any area and adjust accordingly.

Emergency Fund

An emergency fund can act as a financial buffer during unexpected circumstances, preventing you from spiraling into debt.

Credit Usage

Excessive borrowing can lead to a vicious debt cycle, making it harder to live within your means. Be mindful of your credit usage and aim to repay within the same month of borrowing.

Starting Over

If you find yourself burdened with debt and unable to live within your means, it’s not too late for a fresh start. Licensed Insolvency Trustees offer consultations to discuss options for debt relief and provide guidance on budgeting and responsible credit habits.

In conclusion, living within your means is not just about curbing spending but also about making informed choices and planning for eventualities. By ensuring we have a clear understanding of our finances and adopting responsible habits, we can lead a balanced and sustainable lifestyle.

Remember, it’s not about how much you earn, but rather, how well you manage what you have. So, ask yourself again, Are you living within your means?

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