Fool’s Wealth

Day #5 – Establish Your Own Limits

In order to become a master of your debts you need to realise and live within your own limits. Everyone will have different limits depending on the size of their debt and what they earn and you will need to work out your own limits in order to become the master of your debts.
For me personally at the moment there are just some things that I want which I cannot afford. One of them is an ipod touch. I am in desperate WANT of an ipod touch however I know that currently it is beyond my means as I need to use my money to focus on my business.
You need to know your own limits and what you can and cannot afford to have. Some things just simply aren’t worth borrowing money for in order to get them. Make sure you do not step out of the limitations your current income presents to you. As soon as you step out of your limitations

Differentiate between what you need and what you want
Often we will say things like “I NEED …..” but really what we are saying is “I want ……”. Learn to understand the difference between what you really need and what you just want. Try to avoid spending lots of money on things you just want and spend your money on things that you need instead.

Know your own limits in your spending
Have a budget and stick to it. More on writing and sticking to a budget here.
If you spend beyond your means then you will be controlled by debt. So know how much you earn and how much you can spend in each area and STICK TO IT. If you spend more in one area don’t just say “Oh well I’ll do better next month” do your best to cut spending elsewhere in your budget. Spend money within your means not beyond.

Know your own limits in your repayments
Sometimes when you are really passionate about destroying the debt you have accumulated you put all (or most of) you income onto your loan, but then you have no money to live off so you have to take money out again. Be realistic about how much money you can put on your loan and then do it each month and live off the rest.

Try to increase your limits
The last thing you can do is try to increase you limits so you can achieve more of what you want. You can increase your limits in two major ways. By decreasing you debt (and therefore decreasing the repayments you need to make on your debt) and also by increasing you ability to earn money. Setting up multiple streams of income is a great way to earn extra money.
Having investments that earn you money is an example of an extra stream of income you can have, writing an ebook and selling it is an example of an extra stream of income you could have. Find ways to make more income and then your limits will be increased and you can buy that ipod touch 32Gig you have been dreaming of.