Before taking the necessary steps to living below your means, it is important that you understand why you are taking those steps. If the process becomes overwhelming, these incentives can help encourage you to push through.
Here are four key benefits to be realized by living frugally.
1. Debt Elimination and Avoidance
The biggest benefit to be realized from living below your means is the elimination and further avoidance of debt. In other words: Relief.
By embracing frugality, you instantly bring your spending under control. By not going over budget each month, you can start to eliminate debt you may have accumulated, and you can avoid taking on new debts. Debt can be a never-ending cycle, so the sooner you can overcome it, the sooner you can achieve financial freedom.
2. Increased Savings
What are your future financial goals? Do you have a dream vacation in mind, or do you want to be able to retire early? By changing your spending habits now, you will be able to save for your future and meet your goals.
If you can find just a little bit of money to put away each month, you are making progress toward your dreams. Also, by learning the discipline of frugal living now, you will be prepared for retirement. You won’t have trouble adjusting to living on a fixed income later if you can manage to do so now.
3. Less Financial Stress
Money management can be stressful. A survey by the American Psychological Association shows that 72 percent of Americans report feeling stressed about money in the past month and nearly a quarter say their stress level is extreme.
Persistent financial troubles add a high amount of stress to your life. By living frugally, you can eliminate that stress.
And when emergencies arise, that stress can compound. A 2014 report by the Federal Reserve revealed that 47 percent of Americans wouldn’t be able to cover a $400 emergency. This is a sobering number. By learning to spend less than you make, you will be able to build a savings that can cover emergencies, eliminating that layer of stress, too.
4. Building Financial Confidence
When you are able to live below your means and watch your savings grow, you build financial confidence. Taking control of your money, rather than feeling as if it has control over you, is empowering. By gaining that confidence and learning to trust yourself and your financial decisions, you will make smarter financial choices.
Building financial confidence comes from educating yourself about better ways to manage finances, and then applying that knowledge. Learning how to live frugally and actually doing it will help you on your path to financial freedom.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.