by Mar Angelo Tamayo

Created on: January 18, 2011

Are you the person where the money wave through your fingers and gust away in the wind? Are you the person who knew some of the strategies for surviving a financially rational way of life, but still lavish amount of your money leaks through the cracks? If YES and YES, It’s time for you to slow down and learn how to live cheap.

1. TAKE IT PIECE BY PIECE.

Living cheap is a tough thing to do. Sudden changes are impossible to be done in just one time. It is through little by little steps to change your mind from excessive spending to economical living. You must start from the basics or from small amounts until your desired way of spending and saving achieved. Patience, commitment, and proper attitude towards saving money are required for you to be guided in your great way to success.

 2. KNOW YOUR TOTAL EARNINGS.

Being financially illiterate is expensive. You could be a nurse, a doctor, a lawyer, an engineer, or the most brilliant theorist or scientist among all; but you could also be financially illiterate. Money is a totally different world from those stated above. Knowing the total money going in and out of your pockets is a remedy to this ignorance.

First, calculate how many hours you work in a year. Plus, also the hours of travel to and from your work; and the hours used in doing work stuffs at home. Any hours used related to your work, add it here.

Then, calculate your total earning in a year, including all the financial bonuses you are receiving. From that, subtract the taxes, personal needs, house utility bills and transportation costs. Anything that you spend for your job, subtract it here.

Lastly is the most depressing and painful process. Divide the amount of your total earnings in a year by the number of hours that you work in a year.

What is this for? You can use this as a comparison for everything that you spend to, for example, to an expensive gizmo. Use your real hourly rate to know how much of your life you are giving to your work to just buy that gizmo. Then, marvel how much time and energy it will take from you by buying this stuff. If it is worthwhile for you, go! Buy that stuff.

 3. BULK UP YOUR SAVINGS.

Your primary goal in living cheap is to bulk up your savings. For most people, their savings are just the leftovers of their income after they spend a lot. As a result, they cannot bulk much their savings and there’s little left to use for their future necessities.

Your right formula in spending your money must be INCOME – SAVINGS = EXPENSES. It is ought to automatically save an essential part of your income. It’s the rich people and potentially-rich people do: after receiving their salary, they save first, then, pay their bills after.

You must save at least 20 percent of your monthly income. It might be quite large for the beginners but as what the saying goes, “If there’s a will, there’s a way.” Living at only 70-80 percent (10% for God; tithes) may possibly heavy at first but through time it would be lighter and lighter until it become as an automatic action similar to a reflex.

4. SPEND LESS THAN YOU EARN

Spending money is a must for you to live. You cannot live without using your money to buy goods or services that will satisfy your needs and wants. But in spending, you have to consider your monthly earnings. Your expenses need to be less than on what you earn.

By spending less there are many strategies and tactics that can be applied. These can be applied to your home and can be extended to your offices or businesses. Be in tune with the next postings for the different ways to live economically.  

Learn more about this author, Mar Angelo Tamayo.
Click here to send this author comments or questions.