Spending less than you earn seems like a simple rule, but as straightforward as it may appear, every year many Americans become the casualty of their spendthrift ways. Making purchases you cannot afford or don’t need, in turn, leads to uncontrollable debt.
Terry and Tyra Johnson of Yardley, Pennsylvania, have maintained a frugal lifestyle even though they make a combined six-figure salary. Here are four tips from the Johnsons that help them live below their means.
<ul> <li><strong>1. </strong><strong>Tap Into Technology </strong></li> </ul> <ul> <li>In tracking their spending habits, the Johnsons use <strong>Turbo Tax</strong> software. They also use the Internal Revenue Service website and the paycheck calculator at<strong> <a href="http://www.paycheckcity.com/" target="_blank">Paycheckcity.com</a></strong>, at which users can, among other things, determine tax and withholding amounts. Additionally, Terry is able to accurately amend his family tax liabilities on the basis of changing state and federal tax codes.</li> <li><strong><em>What you can do: </em></strong>Find apps or online tools such as <strong><a href="http://ibearmoney.com/" target="_blank">iBearMoney</a></strong>, <strong><a href="http://toshl.com/" target="_blank">Toshl</a></strong>, <strong><a href="http://www.anishu.com/" target="_blank">HomeBudget</a></strong> and <strong><a href="http://www.proongo.com/" target="_blank">ProOnGo</a></strong>, <strong><a href="http://www.mint.com" target="_blank">Mint</a></strong> and <strong><a href="http://www.theexpensetracker.com/" target="_blank">expense tracker</a></strong>, just to name a few. If you know where your money is going, you’ll have a better indication of how to redirect it into vehicles that will help get you on strong financial footing.</li> </ul>
2. Delay Major Purchases
By providing routine maintenance and care on their existing vehicles, the Johnsons ensure that their vehicles will last. “Our decision to delay purchasing a new automobile is inclusive of our budget philosophy and living within our means,” says Terry.
What you can do: Think twice before reaching for the plastic. Instead, plan for major purchases by allocating a certain amount of savings toward that goal each pay period. Learn to distinguish between what’s a necessity and what can wait, stick to your budget, and plan your purchases effectively.
3. Cut Transportation Costs
“Telecommuting provides flexibility and savings for a young, growing family like ours,” says Tyra, adding that she saves about $350 a month by working from home.
What you can do: Useless gas by arranging to work from home once a week. Or team up with your colleagues and car pool. At the very least, organize your schedule to reduce the number of trips or find things within walking distance. If you rely on public transportation, check with your employer to see if you can use pre-tax dollars.
4. Give Pragmatically
The Johnsons, who tithe 10% of their income to their church, have managed to live within their means without forgoing charity. “For us, the key to financial prosperity is adhering to the biblical command to be a good steward of our money—including supporting our church and community while still maintaining a frugal lifestyle,” says Terry.
What you can do: If you tithe or donate money to an organization or charity, include that as part of your budget. Figure out an amount or percentage you’re comfortable with and don’t exceed it. Or, if you’re on a really tight budget, find free ways to help such as volunteering your time or donating rewards points.
To read more about the Johnsons and how they are living below their means, read the Wealth for Life feature “Thrifty Family Living” in the March 2011 issue of Black Enterprise magazine.
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