Let’s get real – living below your means doesn’t sound enticing. At all. The word below makes it seem lesser. Who would want to live below their means? What does that even mean? Let’s find out.
Living below your means is a fairly simple concept – it means to live a lifestyle that costs less than what you make. This is an oversimplification of the matter, but it sets the stage fairly well.
Say you make $3,000 a month. That means, theoretically, you could spend $3,000 each month and be okay. That would be living at your means. If you were living below your means, you might have only spent $2,500. What would you do with the extra $500? Thanks for asking, but you should already know the answer if you’ve read my previous posts. PAY YOURSELF WITH THAT EXTRA CASH.
Why is it important to be living below your means? Before jumping down the rabbit hole that is the discussion of consumerism in North America, let me just start by saying we need a lot less than we think. I’m not just talking about all of the stuff and the things and the do-dads we have in our lives, I’m also talking about some of the bigger expenditures in our lives.
If you made $3,000 a month, do you really need to spend $2,000 on rent each month? Do you need to have that second bedroom – you know, in case someone needs to stay over for the night? Having bigger homes and apartments than what we need is really a cause for disaster for a lot of people. This isn’t to say that you should always buy or rent a smaller place, but you really need to consider where you’re at in your life when thinking about what kind of living arrangements you need. If you’re working that first job and just moving out of your parents house for the first time, maybe you don’t need the second bedroom and second bathroom. If you’re having a family and need to find a place to fit your soon-to-be arriving child, maybe take a second look at that second bedroom apartment. When you’re at an uncertain point in your life or in a place of financial instability, it’s often better to commit to less financially in order to prepare for anything that might happen in the future. Chances are, the first place you move into will not be the last. You’re very likely going to move at some point, so don’t worry about getting enough space for the kids that could be 10 years away.
Robert Brown makes a good point in his book “Wealthing like Rabbits”. If you think back to some of your fondest memories, does the size of the house that you’re in come into play? When you think about that time you unwrapped a brand new N64 on Christmas morning, do you think about the fourth bedroom upstairs? When you think about that family party where Grandpa said that hilarious joke, are you thinking about the marble countertops with the $47,000 range with the lava rock grill you had installed earlier that month?
A lot of the time we buy more house than we really need. An easy way to cut down on your monthly expenses by a significant amount is by living in a place that is more modest and more suited to what we really need.
The same thing applies for cars. Do we really need the $50,000 brand new fully-loaded BMW 3-series? Or could we get by with a $15,000 year-old, slightly-used Honda that doesn’t need the premium fuel? How much value does having that extra $35,000 worth of car really bring to your life? Does it do things that the less expensive car doesn’t? Are the extra things that the more expensive car does necessary in your life?
Cars are almost like status symbols to people. They think the nicer the car that they have, the higher up in society people should view them. That’s not always the case.
Listen, I’m not against spending a bit of money for nice things, I’m all for that. We just have a tendency to buy more than we need for most of the things in our lives. I’m not saying that you should only buy a $2,000 used car that’s going to require $10,000 in maintenance every year. No way. I’m saying to be a little smarter with some of these large purchases, because they will make the largest impact on your budget and your financial life.
Living below your means doesn’t mean that you’re buying the cheapest things and buying small quantities of everything. It means that you’re being smart with your money and buying things that you can afford, while leaving enough money to save when you’re done. Living at or above your means is the cause of a lot of people’s struggles with money. Getting racked down in debt by large purchases of houses and cars that you can’t afford is too common.
Last small thing I wanted to talk about is food. How much food are you throwing away on a day-to-day basis? Vegetables gone bad? That old jar of olives in the back of the fridge? The Greek salad dressing you used once for a Greek salad two years ago? I’ve probably thrown away more food than I care to admit over my life and it costs people a lot of money. Stop buying food items that you aren’t going to use! And if you buy it, then use it!
If you’re living below your means, you don’t need to buy more food than you need. If the grocery store is close by, just go get something if you need it halfway through the week. That’s better than throwing away a bunch of stuff because you thought you might use it and you didn’t.
Living below your means will also offer you a bit of breathing room in case something happens in your life. If you lose your job and all of a sudden you need to make up $3,000 a month in rent and $1,500 a month in car payments sounds a whole lot worse than $1,000 in rent and the $100 for the city transit pass. Once again, I’m not saying it’s bad to spend money on things, it’s just you have to know what you can truly afford to spend money on.
It’s important to sit down before making these big purchasing decisions and figure out how much it is going to cost you on a month-to-month basis, so that you know whether or not you will be able to afford that expense. I’m not talking about breaking even between income, rent, car payments, and necessities. I’m talking about having enough money to cover your expenses, still live your lifestyle how you want, and have money left to save.
I think with a little bit of work, we can all make smarter decisions on our purchases and we can stop overspending on things we can’t afford.
Thanks for reading, eh!
(Bonus points if you can count how many times I say “means” in this post.)