Living within your means - the power of self-discipline.

As you sit in your lounge watching the latest DVD on your new home theatre system, the sound effects are blasting and you feel those pangs of hunger getting stronger. 'What's for dinner?' you wonder, and then you remember...that's right. Baked Beans on toast. Again.

The new system is amazing and it adds a whole new dimension to watching DVDs, but since you bought it you've had to skimp on the groceries because you couldn't really afford to buy it.

This is a prime example of somebody who isn't living within their means. Whether you are a parent with three kids and a mortgage or a single rent payer that goes out three times a week, living within your means is something that everybody can and should practice.

What is living within your means?

The answer to this will differ from person to person because everybody's 'means' and the risks they are willing to take are different. But generally speaking, if you can pay for the things you need (i.e. groceries, bills, rent/mortgage payments) with a little left over to live on without slipping into debt then you are living within your means. If you're really good then you may even have some savings put away that you also contribute to.

In order to avoid splurging on those things you can't really afford it is important to distinguish what category the your expenses fall under. Products for consumption fall into two categories - 'wants' and 'needs'. Consumers will spend a lot of money on these 'wants' without a thought as to whether or not their pay cheque will last until the next one arrives. So here are some quick tips to help determine whether something is a want or a need:

• It's most likely a 'need' if you require it in order to survive (i.e. food, power)
• If you can put off buying it, use something else that you already have, or a cheaper version, then it's probably a 'want'.

Once you can easily distinguish the difference between the two then you've taken the first step. You can now take control of your expenses instead of letting your expenses control you.

The next step is to work out what your priorities are with regards to your spending. Which things should you pay for first? Bills and rent/mortgage payments should be your first concern. If you leave these until last it can be all too easy to overspend on other things and be left without enough money to make your payments.

Once you have paid your bills and bought your groceries hopefully you'll have wee bit left for a little splurge - little being the operative word. So go out for coffee or buy yourself that magazine, because it can be hard to keep on track if you cut these things out altogether, the key is to make sure it's only once in a while.

So there you have it, the basics of financial self-discipline. To be honest its not as easy as it sounds, but once you get into the habit it will only get easier.

Now all you have to do is put it into practice!

Cash Doctors Articles