How to Live Below Your Means

If you only ever learn one thing about personal finance, live below your means is all you need to know. Of course, how to live below your means is the tricky part.

Let’s be honest, living below your means isn’t the American way. When I got a job and went out on my own I thought I was supposed to finance a new car, sign up for credit cards, and buy whatever I wanted as long as I could make the monthly payments. That’s how I thought I could afford something, if the payments fit my budget, not the actual cost of what I was buying. Of course this is stupid and I know that now, but I had no understanding of money at the time and no one in my life had given me any financial advice.

As for how to live below your means, there are only two ways to get there: either spend less than you earn or keep your spending the same and earn more money. If you can do both, that’s obviously the most powerful way to fix your finances.

Just don’t fall into the trap of thinking that you can always out-earn your spending. You can only work so many hours in a day, while there’s really no limit to the amount of money you can spend thanks to credit cards and loans. You need to understand the trade off of your time for the money you earn and how much things cost in terms of you time, not simply in dollars. Find a balance that fits your values and don’t let America’s consumerist culture tell you what that balance should be.

People may think you’re strange when you don’t come home with a shiny new car every couple of years (unless you are paying cash for those cars), or when you don’t buy the trendy new consumer items everyone else has, but you will probably learn to embrace being the strange one in your circle of friends when aren’t suffering under the slavery of debt.

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