There is an age-old saying called “Always live within your means.” This is no more relevant than today’s world.
The main question is: why we need to live within our means? The answer is pretty simple. In the modern world, a person’s status in the society is determined by how much money he/she can hold into? Money is not the thing which can purchase happiness even in this modern world but for the rest of the things, you need to have enough money to help you avoid any problems that life tends to throw at you unexpectedly.
The modern economy and the modern brands encourage you to purchase more and more of their products. They come up with exciting new ideas, new marketing strategies as well as new policies to encourage you to purchase more and more of their goods. This helps them to run their businesses but what about you? Does purchasing more and more goods make anything sense for you? It may help you to show of to your neighbors about your newly gained status but apart from that? Is there anything sensible about purchasing more and more goods some of whom you may not end up using for a considerable amount of time?
Suppose you are an average middle-class person with a good enough job and stable income. You have got a home and a car purchased upon a loan with an easily affordable EMI per month and you think that you can carry on with your merry ways. Now think what will happen to you if you suddenly come up against a problem like say a fatal accident or disease to you or any of your close relatives? And imagine you losing your job at the same time; the question that needs to be answered is what you will do to rectify your problem now? You need some badly needed money at this point but alas you do not have it. Whatever money you are left with is going to be spend in repaying your loans through EMI but alas you will run out of that money also since you have do not have any job. To make your problems worse if it is a recession time then you do not have many opportunities to find a job. So what you are left with now? You do not have much hard cash left with you since you have already spend it through your purchase of home and car and now you, without any income have got very few options to left with since you are without a job and the current market conditions do not allow you to find the opportunities to have a stable and continuous source of income. So what you are left with without money? Only despair and self-blame. Some of my friends have even contemplated suicides in this particular scenario.
To not get into trouble, start saving from now on when you are verging on the biblical “seven years of prosperity” because you may know when the winds of destiny will change and your biblical “seven years of tribulations” will start. Here are some of the approaches you could think about trying.
Do not give into buying things: When you see a luxurious product like a brand new car or a brand new watch and want to own it for you, think yourself this question. Would you need it after some more years or even months? There are two types of consumptions, one is the consumption of necessity and the other is the consumption for status. If you really buy a product because you want to use it badly for your services then this is considered the consumption of necessity and if you just want to own it for showing off then it is called the consumption for status. We need to avoid the concept of consumption for status as much as possible to save money.
Chalk out your requirements: First before each year, chalk out your requirements. Do a list and try to find out what are the most important things that you want to buy. And then do a ranking of those items and those which are deemed to be most necessary will be given most priority for purchasing and the rest will have lower priority. Now plan your income accordingly.
Save for the bad times: There are many ways like fixed deposits, insurances, annuities, government bonds, mutual funds and other schemes to keep some money there for saving in future. Please make an annual target to annually allow a fixed amount of sum to be disbursed into these sorts of ways. This will allow you to save a lot of money in future when you do need them badly.
Prepare for emergency: Always leave a fixed amount of money saved in your bank account from where you can call it back once you want it at the emergency situation.