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Live within your means

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Some people say that the key to managing money well is to 'live within your means'.

You need to make sure that your monthly costs and expenses are less than your income, which is the amount you earn after taxes have been taken out. If you can live within your means, then you'll be able to stay out of debt and save.

A good way to establish if you are living within your means, is to keep a daily record of where your money goes during a typical month.

According to an OECD report into adult financial literacy competencies in G20 countries, 40% of respondents in China reported that their income did not always cover their living costs, and 28% borrow to make ends meet (% of all respondents).

Here's how to get started

  1. Make a note of everything you spend each day, over a month. Include everything, from your daily commute to the snack for the journey home and regular payments like your rent or mortgage, and utility bills. If you carefully track your outgoings, you'll feel more in control and will be able to see where your money goes. You may find it helpful to track your outgoings using a digital tool or a mobile app from your banking provider. Check whether you can set up notifications to let you know when certain payments are made each month, or when you reach a particular balance.

  2. At the end of the month, add up all of your expenses and subtract this total from your take home pay. If your monthly expenses come to less than your take home pay, then you are living within your means.

  3. Take time to reflect. If you aren't living within your means, don't worry. There are plenty of things you can do to take control of your spending. Start by using the record of your spending to identify which expenses, if any, could be reduced or avoided.

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