Living within your means

When you live within your means, you are spending money based on the money you have. At the same time, you are putting aside money as savings to meet your financial goals.

It is so easy to overspend. Products are constantly marketed through TV, radio, billboards, magazines, newspapers, social media, etc. It ultimately depends on you to be strong-willed to resist all these temptations.

You can do so by understanding what influences your spending and what your needs and wants are.

A need is something you must have, that you cannot do without. An example of a need is food. You need to eat to live. Otherwise, you would not survive for long.

A want is something you would like to have, which is not absolutely necessary. Jewellery is a want because you do not really have to wear it for survival.

In today’s world, for example, a mobile phone with basic features is a‘ must have’ for communicating with other people. However, one that has Bluetooth, a music player, camera and video, is a ‘nice-to-have’ mobile phone.

Knowing the difference between a need and a want, will make a significant impact on your spending behaviour and, ultimately, your financial future. The decisions that you make in regard to what you need or want will affect your budget and your monthly spending.

Spend wisely

When you want to buy something, ask yourself – Is it something that I need? Can I afford to buy it? Your personal budget and cash flow will help you answer this question. Check if you have previously allocated to spend on this item or have already overspent your cash for that month.

If it is a want, consider not buying it or spending less for something similar so that you can put more into your savings. When you do this, you are spending wisely and living within your means.

Making sensible purchasing choices and spending wisely will prevent you from creating financial difficulties for yourself and others. Handle your personal finances in a responsible manner, it is easy if you just learn to say ‘no’ to purchases you cannot afford.

Delay purchases

Do you remember your childhood days when you wanted an ice-cream and your mother said that you could have it later, after you finish your homework?

Do you remember asking your father if he could buy you a new bicycle and he said that you could have it later, if you did well in your exams?

In both situations, your parents were teaching you to delay purchases.

Throughout your adult life, there will always be someone that will try to influence you into spending your money. If it is not your friend asking you to go out to dinner, it will be the sales promoter at the hypermarket asking you to buy their product.

Take the time to think whether it is necessary to spend the money and is it something within your budget?

Remember when you say ‘no’ to spending money now (by delaying purchases), you are one step closer towards achieving your financial dreams.

In life, there are always alternatives to choose from. Look into different substitutes for your needs and wants. Change your perceptions, if necessary.

Instead of buying a car, using the public transport might be a good alternative to moving around the city. You will save money and furthermore contribute positively to the environment.

Next week, we will look at the various financial products in the market.

The Credit Counselling and Debt Management Agency (AKPK) is an agency under Bank Negara Malaysia tasked to help individuals take control of their financial situation. For assistance, please contact AKPK’s Power Infoline at 0326167766 or visit www.akpk.org.my.