Your means is something that you should not live up to.

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I am probably stating the obvious in this article but maybe not.  This economic situation of the recent past has given everyone a chance to reassess the way they handle money.  If you haven’t been hit yourself with financial difficulty then you probably know someone who has.  This article will not tell you how to fix things.  This article will tell you how to prepare for next time.


The good times will return; there is not doubt of that.  When they do will you go back to your old way of thinking or will you consider a different approach to handling money.  Through the nineties and into the new century, there had been the notion that we could make clever moves with our money and live large on a standard income.  People would run up the credit on new cars, new computers, and new whatever and then use the equity in their house to get a loan to pay the debts.  Then they would start all over again running up the credit expecting to get more equity in their house in a few years to once again pay the debt.  It is clear that the gravy train didn’t just come into the station; it crashed through it, caught on fire, and exploded.  People were left with heavy debt, no equity in their home; some even went to negative equity.  Can you say, “Bad news”?  That is called living beyond your means. 

Fortunately not everyone was so adventurous but even if you didn’t live beyond your means you still could end up in trouble.  Living up to your means also can be a disaster when bad times hit.  If you know how much you have to spend and that’s how much you spend, that leaves you with no safety net.  If you are paying your bills and spending the rest you are working without a net.  You need a savings plan and you need one now.

The only way to weather a financial storm is to live below your means.  You need to make an honest assessment of your situation, figure out how much you have to spend after the bills are paid and then cut that by at least ten percent.  Take that ten percent and put it in savings.  In this economy you need to have an emergency fund of six to nine months to cover your bills if you lose you job.  

The next place to save is your retirement account.  Most American companies offer a 401K type retirement account; it is a replacement for a company pension.  Most American companies have done away with pensions because they could no longer be in a situation where they were obligated to pay their retired employees.  Instead they administer a 401K plan and, if they’re nice, they will match a small portion of what you contribute.  Even if your employer just contributes a few percent, the company is giving you free money.

Here is the real incentive.  The money that you invest in your retirement fund is not tax deferred.  That means if an average employee invests $100.00 in his or her retirement fund at work they will see their paycheck reduced by only $65.00 to $75.00.  That’s money you keep instead of it going elsewhere.  On top of that is the possibility to get the aforementioned match by the company.  You could get several more dollars added to your hundred bucks.  This is free money folks; you need to get in on this.

You must remember that sales people, including real estate agents want you to buy.  When they close the deal, they get their commission; what happens to you after that is not their problem.  If a real estate agent tells you how much you can pay for a house based on your income and financial situation; cut that price by twenty-five percent or more.  Do your own math.  How much money do you need to live your life?   If so much of your income would be tied up in the house that no vacations would be possible or paying for your child to join a local sports club would be out of the question, then you would be house poor.   Do not let a real estate agent talk you into something that you can’t really afford.

Next in line in this game are car dealers.  Yes the red sports car is really cool and you would look so good in it but what is it going to do for you and your family?  What are you going to pay for it?  What does it cost in terms of gas and upkeep?  Can it get the family where they need to go?  Do not fall for the, “You worked hard, you deserve it,” line.  It’s not only the sports cars.  There are those monster SUVs with movie screens at every seat.  If you are making big bucks then get two of them if you like, but if you’re on a budget I would think twice.  I believe the best way to shop for a car is to look online for pricing and selection, find the dealer that has what you want, and go buy it.  That’s avoids at least some of the song and dance.

We can’t forget the tech toys.  The world tells you that you must be totally connected, but do you really?  Before you pay for Internet and all the other bells and whistles on your phone, run the numbers and determine the bang for the buck.  These capabilities are very important to some business people on the go but for most of us they are a techie toys.  Be real with what you have on your phone and what you need in a computer.  You don’t have to buy a new computer because your old one doesn’t have the graphic capability to play the latest game.  If you desperately need to play the game there is another way to make it happen.  You can do about thirty minutes of research, find a compatible video card and buy it.  It will cost less than a hundred bucks and take about ten minutes to get it up and running once you receive it. 

You will be surprised how good it will feel to know that you have financial backup.  What you have done is to create your own personal insurance and it will make you sleep better at night.  You won’t miss the fancier car and you will find quite a few nice houses in your real price range.  Live below your means and you will live above financial trouble.


Pete is a retired software developer, a writer, and a martial arts instructor. He lives in Maryland with his wife Cathy and they are enjoying their retirement. Pete is the author of four novels, "The Teacher", 500 Years from Home", and "The Long Journey Home" are available at; and "Pioneers" in available at the Kindle Book Store.

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Posted in Opinion, You Money
2 comments on “Your means is something that you should not live up to.
  1. Tony says:

    That was good Pete, that is basically what I have done all my life. It has paid off. One of the biggest things is to save something from each pay check even if it is only five bucks,
    it is a start. That is how I started out working for minimum wage for a couple years but always saving a buck or two.

  2. petejoem says:

    Thanks Tony. Yeah, saving is the only way to protect yourself against things that can happen.

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