Are you racking up credit card debt and spending more money than you have? Clint Parker of Bright Peak Financial discusses the importance of living within your means.
One of the most common budget-busting mistakes people make is spending more money than they make. Even if you are expecting additional income in the future, wait until you actually receive that income to spend it.
“A pitfall would be to say ‘You know what, I’m overspending a little bit but I got that raise coming up or I’m going to put this on my credit card because I know I’m going to get that bonus.”
Often, it turns out the raise wasn’t as much as you thought or you don’t quite get the bonus you hoped for and you’re overextended.
“We can avoid those problems by spending the money that we have and when the windfalls come, we can be more generous or treat ourselves.”
There’s a difference between what you want to spend and what you can spend.
“Most people don’t want to create a budget that limits what they can spend, but smart people are going to think about and track what they’re spending money on and then they can create a budget based on that.”
It’s important to keep track of your receipts and purchases because small purchases at coffee shops or restaurants can add up quickly over weeks and months.
Many people overspend simply because they aren’t aware of how much they really spend in certain areas. Understanding where your money goes every month can greatly decrease the tendency to overspend.