Below Your Means Basics

This month we will be presenting a series of Below Your Means (BYM) Basics articles to help those of you who are new to living below your means, and serve as a refresher for those of us who have (or strive to) live the BYM way.

When you live below your means, you shed a huge source of pressure and strain in your life.  Spending beyond your means, in other words – going into debt – means you are trading your future to get something now.  You are agreeing that in the future you will be willing and able to have a certain amount of money.  But none of us can predict the future.  There are lots of ways people get into trouble with debt.  Accidents and health problems lead to massive medical bills and lost wages.  Your ability to earn can be impacted by layoffs, swings in the economy, your own health, and the health of your loved ones.  Those common tragedies are only one reason to worry about spending more than you have.  In fact, bankruptcy laws are in place to protect people specifically from those kinds of ‘unexpected’ crises.

Money CastleThere is a much more insidious price to pay for living beyond your means.  Doing so assumes that you know now what you will want and need in the future.  In reality, most of us aren’t entirely sure what we want and need today, much less the kinds of opportunities and challenges we’ll face tomorrow.  When you take on debt and fail to save, you narrow the possibilities of what the future could hold.  Want to move to a new town?  You’ll need a job with an income sufficient to pay for your debt, and you’ll need to sell your house before you can buy a new one.  Tired of your car?  You can’t sell it because you owe more money on it than it’s worth.  Have a great opportunity to travel to a place you’ve always wanted to visit?  You can’t take the time off, and you don’t have the money saved up to go.  Hate your job, or worse, discover that your career is unsatisfying?  You’re stuck because your monthly payments are too high to switch to something new.

Saving, on the flip side, acknowledges not only that you need to be prepared for the problems of the future, but that you want to have resources at your disposal to seize the opportunities that come your way.  Want to move to a new town?  Sell the stuff you don’t need, get a few leads on some work if you need them, and get going.  Tired of your car?  Sell it and get something else (or go without).  Have a great opportunity to travel?  Plan a leave of absence and head out!  Hate your job, or worse, your career?  Feel free to get started on the next chapter in your life.

In short, money is a tool that you can use to achieve happiness.  It certainly isn’t the only tool, but it’s an important one.  Using it wisely requires that you know yourself and what makes you happy, and you understand that as you grow and change, your wants and needs will grow and change.  While our site isn’t designed to help you live a deliberate, centered life, there are a few resources we recommend to do so.  Franklin Covey’s The 7 Habits of Highly Effective People, while centered a bit too much on an upper-middle class suburban existence, has a great process to follow to think through what is important to you and how to get there.  And David Allen’s Getting Things Done: The Art of Stress-Free Productivity is such a great way to organize your life that he has spawned what Wired magazine referred to as a cult of hyper-efficiency.  Covey’s book especially can take you to additional resources on how to live a successful, meaningful life, but honestly — whatever helps you discover more about yourself, and how to make good choices, go for it.

This month we’ll explore:

  • The Basics of Tracking Your Spending and Building a Budget: This is the single step with which your journey starts.  Sure, you can cut down on your spending, even significantly, without knowing where your spending is going.  But finance is, at it’s most basic, an exercise in math.  If you bring in more money than you spend, you’re living below your means.  If you don’t, you’re not.  Tracking your spending isn’t everything when it comes to living below your means, but it’s hard to be successful without it unless you institute an all-cash system.  Fortunately, there is a whole industry building computer software to help make it simple, and some of it is free.
  • The Basics of Debt and Savings: Debt means giving up opportunities in the future for a lifestyle today.  It is a very dangerous gamble.  You will also see how to use debt as means to manage your cash flow and take risks to increase your wealth.  If you have consumer debt now, you’ll need to first and foremost – stop digging the hole deeper!  Next, you’ll need to pay that debt off as soon as possible and free your future from the tyranny of your past decisions.  Savings, on the other hand, gives you freedom.  It means you have protection from the unexpected and resources that you can use to seize opportunities.
  • The Basics of Spending Wisely: Tips and tricks for spending the least amount possible on things that aren’t critical for happiness and health.
  • The Basics of Living Richly: Spend your money on things that bring you true satisfaction and happiness.  Spending as little as possible for everything else.  Knowing the difference isn’t always easy, and we focus on tools and techniques to help you get there.  To start, realize that most millionaires are ordinary people who live modestly.  And, as this study shows, money doesn’t necessarily bring happiness beyond a certain income.
  • The Basics of the Investing Smartly: Keep tabs on the economy and investing opportunities.  While we aren’t a strict investing site, nor are we financial advisers, we do report on happenings in the economy so you can make educated decisions about where to put your hard-earned savings.  We also believe that, like personal debt, government debt is very risky and the government’s inflationary and spending policies are significant risks to personal well-being and to our country’s future.
  • Common Pitfalls: Identify common pitfalls on your way to financial independence, and share the stories of people who share your commitment to living well by living below their means.

 

Thumbnail Photo: Blocks 1 by Crissy Alright

Story Photo: Frits Ahlefeldt-Laurvig

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2 Responses to “Below Your Means Basics”


  1. Below Your Means Basics: Track Spending and Build a Budget | Below Your Means

    […] Below Your Means Basics explores the value of living below your means and the importance of using finances as a tool to achieve your personal goals […]

  2. Below Your Means Basics: Understanding Your Debt | Below Your Means

    […] The biggest problem with amassing debt is that you are giving up flexibility in your future for flexibility today.  You are agreeing that in the future you will be willing and able to have a certain amount of money.  But none of us can predict the future.  We don’t know what misfortune will befall us, what opportunities will come our way, and what our personal goals will be.  You can read more about our thoughts on debt in our first Back to Basics article. […]