Ability means available resources that we have, especially money. So, how do we live in accordance with the money we have? It's simple. We should be spending less than income! That's the secret, past and present.
Regardless of the amount of our revenue, reduce expenses.
Regardless of the amount of our revenue, reduce expenses.
There are three simple questions you ask yourself that will help you know whether you actually live according to your ability.
• First
Do you owe money to someone else? It does not include long-term debt as the total price of your home or car (however, it is possible to buy a house or a car that is far beyond your ability, so beware).
• Second
Are you able to pay all your monthly bills? Furthermore, could you continue to pay all the bills for the next six months?
• Third
Is your debt increases or decreases each month? If you have a debt, whether it is paid without incurring further debt? Can you pay all your bills and have money left over at the end of the month? If yes, you are living according to your ability.
Then, if you have credit card debt or pledge of your home, you should ask yourself why you have that debt. If it is the result of a one-time purchase, and you plan to pay it off right away, not a problem. On the other hand, if you have many times using your home as collateral in order to make a payment or a purchase, you have a problem.
Using debt to pay off debt is usually not a good idea. It is like digging a hole, cover the hole. The problem you will be aware that in order to close the new hole, you will need more land, and before you know it, you will have a big hole when you're running out of land.
The only way to be free of debt is to increase your income or reduce your expenses. There are several ways to do it. If you are just a little bit extravagant, the easiest way is to analyze and reduce your expenses. For example, you can cook meals at home instead of buying food outside, or you can switch to using public transportation to save money on your fuel.
If you are spending far greater than your income, you need to make big changes. New jobs with higher salaries or a second job can be a solution for your problem. You can combine efforts and reduce spending while taking a second job. These are difficult decisions and you need to consider it carefully. Regardless of the cause, if you are spending more than your income, you have to do something to fix it immediately or you can end up with a big hole that will never be able to close.
