Living Below Your Means
- 2004 23 Feb
I wouldn't call it a radical new idea, although a recent issue of Good Housekeeping magazine did say that living below your means (LBYM), is the hot new trend.
It is a simple concept-spend less than you earn. Still, LBYM is seen by many as a life sentence, not the lifesaver that it is. It can take a crisis like unemployment or a sudden illness to reveal to some people just how far in over their heads they really are. That's when a lifesaver can look mighty good.
LBYM means living the best life you can on what you earn. It means learning how to manage your income so well that you can live your life for half the price.
A household is just like a business. You earn revenue and you have expenses. If you spend more than you bring in you will eventually take on debt. A business that continually takes on debt will eventually fail. Same in a household. In a business you make spending decisions based on the effect they will have on the business; you decide how to reinvest your profits to improve your net worth. It is a healthy company that ends the year not just breaking even, but with money in the bank. Same at home. This is LBYM.
Make a commitment
It's a good time to make some decisions about the future, it being the New Year and all. But a commitment to LBYM should not be taken lightly. It's a big deal, particularly if you, like most people these days, have come to see credit as a required extension of your income.
Of all the things in your life there is only one that you control absolutely and that is your attitude. You choose your thoughts and your response to life and all that happens to you. Making a commitment to LBYM is one of the most important choices for your head and your heart that you will ever make.
If you've ever flown on a commercial jetliner, you have survived a controlled crash-also known as landing. I'm no pilot, but I've read how much control is required to take a piece of machinery that weighs roughly ten million tons (give or take) going at a speed of 600 miles per hour and bring it to a full and complete stop precisely at the gate cited on that monitor inside the terminal. It's called reverse thrust and depending on the length of the runway, that braking sensation can be quite an interesting experience. You're belted in and for good reason. You could get thrown on your head. Thankfully those systems work thousands of times every day.
If you've been spending all that you earn plus a lot more, you've been spending at a rate of about 600 miles per hour, metaphorically speaking. Things are out of control. You need to bring your large debt problem to a halt.
At first it will feel like you've just reversed your engines, that you're about to be thrown on your head. That's when you'll be thankful for your seatbelt (Cheapskate Monthly) to keep you strapped in and upright. Once you get your bearings you'll be ready to take the first step: For 30 days track your spending. Write down everything. You have to find out where your money is going.
The consumer credit industry would prefer that you give up silly notions of LBYM. They want you to drift through life in a spending coma believing you deserve everything you want and that you can have it all.
Wake up! Start talking to yourself. Whenever you are faced with a desire to spend, STOP and ask yourself:
Can I afford it?
Do I really need it?
Do I need it now?
Do I have something like it already?
Can I find a cheaper substitute?
Is this the best deal?
If you make it through all six questions, go home and sleep on it. Tomorrow you'll probably change your mind.
Develop a plan
An attitude change is essential and just the start. You have to develop a plan 1) to get out of debt, 2) to be prepared for unexpected expenses and 3) to reduce your expenses significantly. Your plan needs to look good on paper and it has to work, too.
That's what debt-proof living is all about. It's a plan to get you out of debt and on the road to financial freedom!
© 2003 The Cheapskate Monthly. All rights reserved. Used with permission.
"The Cheapskate Monthly" was founded in 1992 by Mary Hunt. What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt. Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates. Click here to subscribe.