by Vanessa D. Alexander

Created on: December 28, 2008

Living within your means is easy to detect. If your household is running smoothly, if you can pay bills relatively on time, keep your family dressed and fed modestly and sleep at night, you are living within your means.

Living within your means is depending only on income that flows into your household to maintain it. The litmus test is, if your household is out of order every other aspect of your life is as well.

A financial plan is the backbone of a well run household. Budgets are helpful but limited. A plan to live within your means that projects into the future five to thirty years is a road map. This map can help considerably to keep you focused on what is important. A plan determines what employment you will seek out, how many hours you need to work and what your family and household needs may be years from now.

A budget is only one aspect of a financial plan. It allows for a reality check from day to day or month to month. On the other hand, a financial plan is all encompassing if you want to look ahead and determine where you will be when you're middle aged or retiring from a job or career. We need guidelines that follow us from one phase of life to another.

Living within our means requires a long term plan and is a discipline acquired with time and experience. You won't find college courses or training manuals at work on the subject. Like parenting, you learn as you go.

When you decide you really want to live within your means, think in terms of a long range plan that focuses on your household first. Begin where you are right now. Jot down income sources using net income. This is income you have on hand per week or month after all deductions have been subtracted. Be realistic, even brutal about your financial condition.

Without having a financial plan living within your means is impossible. Start with a budget for the month. See how the budget works over a period of three months.

Once a budget is in place you have a realistic estimation of your household right now. At this point, you can move on to decide needs and desires. This hurdle is crucial. Defining needs and desires get us in trouble every time. Don't think cheap. Think efficient.

Example, using a shovel to clear the snow from the driveway is sufficient when you're twenty. At the age of forty five, it may be more efficient to purchase a snow blower. A financial plan can foresee this, a budget won't.

When we think of living within our means we generally think of cutting back on expenses. Though this is part of the process, it is more effective to think of living within our means in terms of having a plan for our household, that projects into the future.

We all live within a twelve month year. A budget can determine weekly and monthly needs and expenses to keep us in line. A plan determines our financial condition in the future.

Means implies income sources, allocations, restrictions and how spending flows. Living within income limitations is a plan. Create a foundation for learning to live within your means:

1. Start with household organization (You know best how your household operates)
2. Define your income as the means
3. Create a weekly or monthly budget. Revise only if absolute necessity dictates changes are needed

4. Define needs and desires (Be brutal)
5. Do three month assessments to see where you are

Now you have a basis to create a financial plan, which is really what defines, living within your means.

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