Your cost of living is an opportunity cost for saving or investing for the future. The more it costs you to live, the less you can save. While everyone has daily costs of living, you might be paying more than you realize. Here’s how to tell if your cost of living is too high and how to fix it.

What is the Cost of Living and How do you Calculate It?

Your cost of living is how much it costs you to live where you live and the way you do. It’s compared to your income to determine if you’re living outside of your means. No two people will have the same living costs because everyone lives different lifestyles and has different income. Your cost of living is your monthly expenses for things like your house, food, car, healthcare, and any other necessities. It’s the cost of anything you couldn’t be without to live your life, aka the necessities.

Is your Cost of Living too High?

You can compare your cost of living to the ‘average living wage’ for your area. For example, if you live in Denver, Colorado, and have 3 children, you’d need to earn the equivalent of $67.28 an hour to afford the daily cost of living in Denver. If your income doesn’t cover the average living wage in your area, your cost of living may be too high. Fortunately, there are ways to lower it.

How to Lower your Cost of Living

If your cost of living is too high, here are simple ways to lower it.

1. Reassess your Bills

See which bills you can lower. Some services you can shop, like internet, cable, and cell phone plans. You may even be able to get cheaper insurance or cancel unnecessary insurance. If you have a mortgage, see about refinancing to get a lower payment.

2. Pay Debts Down

Look at your spending and see where you can cut back to pay your debts down. Eating out, entertainment, and grooming appointments often cost more than you realize. Try cutting back anywhere you can and using the money to pay off your debts.

3. Don’t Use Credit Cards as an Extension of your Income

If you routinely use credit cards, stop. They aren’t an extension of your income. Each time you charge something and don’t pay it off in full, you pay interest on the purchase. When you don’t borrow money to cover the cost of living, you’re more likely to live within your means.

If your cost of living is too high, now is a great time to revisit your budget and cut back. With inflation rates as high as they are right now, everyone should do their part to cut back. Save as much money as you can to protect yourself for the future. If you need help lowering your cost of living or you aren’t sure if you’re living outside your means, let the financial experts at JMV Financial Services help, contact us today!