How to Escape the Rat Race - Step 1

Take control of your money!

Simply put, live below your means. If you find yourself spending more every month than the amount going into your bank account then you are living above your means, and ultimately this cannot continue. Take a look at the banks in 2008 – they lent to people who could not afford to repay loans. They were living above their means and it all came crashing down, leaving the world in recession.

If you are unsure of where your money goes, keep a financial diary for a month or two. Write down everything you spend your money on, whether it’s a £200 bill or a 60p can of coke. At the end of the month add it all up. Is the amount greater or less than the amount you earned? If it’s less, good – you are already living within your means. If it’s more, don’t worry too much, you just need to take the reigns of your finances and get back control!

Budgeting is key to controlling your finances. List everything you MUST spend a month to get by. These are bills that you have to pay, like:

Mortgage / rent
Council tax
Clothes
Heating / electricity / water
Petrol
Insurance
Phone bills
TV licence
Car loan
etc

Unfortunately these are the things that we can’t just stop paying, BUT, if you must pay them you might as well make sure you are getting the best value, right? Next time your car insurance comes up for renewal ABSOLUTELY DO NOT just accept the quote that your current provider gives you. Moneysupermarket.com is your friend! Go online and make sure you get the best deal. The same goes for water, electricity, gas, mobile phone contracts, mortgages, etc. Always strive to get the best value for your money.

Now list all the things that you buy every month that you don’t need and the frequency of these purchases. This is pretty much everything else, like:

DVD’s
CD’s
Cinema
Meal out
Drinks down the pub
Day’s out
Costa coffee

Look at each one and ask yourself if you really need – if you are living below your means anyway then you may not want to cut back on anything on this list, which is fine. But if you are living above your mean, then you will need to look at this list and maybe rent a DVD out instead of going to the cinema, or cook a nice meal instead of eating out. You don’t have to make sweeping changes to your lifestyle, just ensure you are living well within your means.

Say you have monthly expenses of £1500. Just saving 10% is equal to £150 a month – this is almost £2000 a year!

Once you start living within your means you are on your way to escaping the rat race!!! Stay tuned for step 2 – destroying the debt!!