Do you take the time to budget? If you do budget, do you stick to that budget? If you answer yes to the first question, congratulations, you’re ahead of 66% of the U.S. population who does not budget (and your probably ahead of the majority of Americans who make a budget but then can’t stick to it).
Even if you do budget, are you living within your means?
Have you considered ALL of your expenses?
Your Financial Situation Might Not Be as Rosy As You Think
Years ago, I used to think that we had budgeting down. We didn’t spend more than we earned, we didn’t have credit card debt, we set aside money each money for irregular or once a year expenses. We were doing good, I thought.
My husband, however, was raised with much more financially conservative parents than mine. He worried that we were living beyond our means.
How could that be, I argued. Look how well we’re doing financially. (And compared to my parents, who were always in debt thanks to a low income and struggled to pay monthly bills, we really were doing well.)
My husband’s worry was that we weren’t saving enough. Sure, my employer deducted 8% of my gross pay automatically and deposited it in a retirement fund. But, we weren’t putting any money in a retirement account ourselves.
In addition, we just had a tiny one month emergency fund. We should have been saving money every month to grow our emergency fund, but we weren’t. In retrospect, my husband was right.
Sadly, we weren’t alone in our inability to make saving for retirement and emergencies a priority. ABC News reports on 54 year old Karen Zarky who now has only $100,000 in retirement. She states there was always another expense vying for her money–putting her four kids through college “was very expensive. Or we wanted to take a trip. Or something needed to be done on the house. There was just always something that was more important than putting that money away in a savings account.”
Are you like me or Zarky? Or does your budget include line items for retirement savings, emergency savings, and perhaps short-term savings? If it doesn’t, many would argue that you are not living within your means.
Saving for Retirement Can Be Easier Than You Think
Before you budget for fun items like a vacation and the kids’ extracurricular activities, make it a priority to save for yourself first. Airlines always tell you to put on your oxygen mask first before helping others. This same is true here. You must make saving for retirement and emergencies a priority because no one else is going to do it for you.
Financial planner Kevin Ellman says, “‘I tell people to pay themselves first, to decide on a savings target, 10 percent to 15 percent of their income, put that into a retirement savings plan, and force themselves to live with what’s leftover” (ABC News).
This can be difficult to do, but one way to help force savings is to have the money taken from your paycheck and automatically deposited into your retirement and savings account. After a few months, you won’t miss the money so much, I promise.
Do you regularly save for retirement and emergency savings even if you’re living on a limited income?
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Living within your means assumes that you have budgeted correctly. If your budget includes the category Credit Card Payments you are not living within your means.
This shows why priorities are so important. Once you know how much each goal costs, it's easier to prioritize. I can't believe that someone would choose to put their kids through school for $100k and completely disregard retirement. Oops.
@AverageJoeMoney Especially when you can get financial aid and student loans (if absolutely necessary)...you can't get retirement aid!
@chuck_the_buc Is that fun?
@markrsports No, but reality says that too much fun now leads to financial distress when you can't work anymore.
@chuck_the_buc that may be next week. I'm glad I have the best accountant in the business.
@markrsports no offense Mark, but I could take you when I was not in shape. I just couldn't catch you.
@markrsports there's no fence around me big fella.
@markrsports yeah, it pretty much does.
@chuck_the_buc just because you are in shape doesn't mean you can take me.
@markrsports No kissing up. :)
Your balance sheet should answer that question for you, too bad most have no clue how to create a balance sheet or how to read it.