We continue the Money Habits series after Series 1: Knowing what your dollar does and Series 2: Pay yourself first

This is something quite important, especially amongst the generations young and old, the youngsters often cop more flak for it unfairly.

Life is about living within your means and not the designer clothes and luxury cars. If one has the got the spare cash, fair enough if they knock themselves out. If they later end up being indebted for the quick pleasures, well that’s their choice too.

Hindsight gives everyone 20/20 vision.

If you look at most successful people, you will see that they live within their means. They avoid a habit that most of the population is guilty of.

The habit? The more they earn, the more they spend.

I’ve always believed the successful journey to financial freedom is based not on how much we earn, but how much we keep.

There are people who increase their credit card limit when their salary increases or finance a newer car because they can afford higher repayments.

There are many reasons people’s spending increases when their income increases and below is just a small list, if one these reasons is at the forefront of their spending, it’s likely to reflect their situation and should ring an alarm bells:

  1. Keeping up with the Jones’s
  2. Avoiding the truth of their financial situation because it’s too uncomfortable
  3. Immediate gratification
  4. Sense of self worth
  5. Maintain a lifestyle

So from Series 1 and 2, if one does not track their money and have discipline they are increasing their chances of getting more and more behind.

This is because most people end up maxing out their lines of credit, if they do not have any savings to access funds.

The average debt per household in Australia is a whopping $168,600.

According to the Australian Bureau of Statistics 30% of Australians were classified as over-indebted.

Below are more statistics for us to consider and think on:

  1. 62% of people aged 25-34 are over indebted
  2. 51% of people aged 35-44 were over indebted

The most common reason driving the above numbers is the lifestyle and people living above their means.

Therefore, it is extremely important to live within your means and set ourselves up to make a difference in our lives and those of our loved ones.

This is not financial advice. Please read our disclaimer.