You’ve received a tax lien letter from Uncle Sam describing how the government is going to take what little income or assets you have. What is a tax levy? Any U.S. citizen who owes back taxes will have a tax levy placed on their assets until their debt to the IRS is finished. The IRS has the legal right to seize a certain amount of a citizen’s personal assets like your home, car, bank accounts, wages, and other personal properties. Even a senior citizen, who collects Social Security payments, can have up to 15% of their monthly payment garnished. Please note, however, that garnishments are the government’s very last resort to have its citizens pay what they owe.
Just for this IRS reason alone, it is important to live within your means. Now that we are in a new year, think about starting fresh and making new financial goals. We all would like to splurge occasionally but only after all your basic needs have been met. After all, saving money helps to prepare for your tomorrows that can involve education, a new home, a favorite vacation, marriage, children, a car, etc. Living within your means is a budget style of living. You must budget or save because it will help you reach your goals without stress.
The advantages to living debt free involve fewer expenses that you worry about to keep you awake at night. It gives you physical and mental freedom, which gives you more emotional time to concentrate on what’s important in your life. When you can live within your means, you are happier and more content. You may not be filthy rich, but you and those you love are living more carefree than those who are deep in debt. The key question is, how can you budget your spending habits.
One of the best techniques is to look at your wants (discretionary spending) versus your needs (essential spending). Are you making purchases that you want but really do not need? Yes, you enjoy going to the movies once or twice a week, but with the cost of today’s movie tickets, not to mention your movie food, you could put some of that money away for a rainy day. No one is asking you to stop enjoying life, just understand your priorities for today and tomorrow. Remember, you can reduce the number of times you go to the movies without cutting out altogether your entertainment enjoyment. Making this minor change goes a long way to improve your financial health without depriving yourself totally.
In America, it seems that most of the citizens’ debt is in the form of credit card debt, loans of various sorts, and other debt forms. Knowing how long it takes to pay off debt, especially when interests rates are so high, we must learn to live within our means and learn to manage our spending more wisely. Yes, just the word budgeting emits a strained emotion. Don’t call it budgeting, call it working toward your goals or your vision board.
Identify your income sources then subtract your essential expenses. If you are left with a negative, then you are using too much of your income. Life changes and sudden emergencies can happen at any time. Look at where you can put aside a few extra bucks even if it is only five dollars at a time, it is better than nothing in case you find yourself in a financial bind. You will be surprised how much saving a few extra dollars adds up.
Earlier, we talked about the IRS. Let’s look at tax return monies. If you are due a refund, put some of that money aside and don’t touch it until you really really need it. Tax returns are a helpful financial relief when you are trying to keep your head above water. However, don’t be too anxious to use all of your refunds to get financial relief. Instead, save some of it without thinking about it – this is a saving that you can use later.
Remember that living within your means is not about deprivation. Live on less to enjoy more later. Think of new ways to enjoy life so that you will have more money to pay your rent, mortgage, utilities, etc. In other words, think about what you really enjoy spending money on and then find another way to enjoy it for less money. You can do it!