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18 Aug 2004

Living Within Your Means

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by Jesse Mecham

So simple.

But few do it.

The reason that so many people don’t live within their means is because they don’t know what their “means” are. It would be extremely difficult to work for a boss that yelled at you for going over budget on a project, but he or she wouldn’t tell you what your budget was.

And people float along from day to day, never really knowing how much they have to spend, or where it’s all going. They might wonder why they don’t have more, or even worse, wish they had more, but they rarely do anything about it.

So – live within your means.

Before we implement this, let’s get a few things straight:

1. You can expect a “raise” in pay. I’m confident you will get it.
2. This will take hard work.

In order to live within your means you have to establish your means. If you don’t know how much you make per month then you are one strange beast my friend. I don’t foresee this being a problem for people. If your income fluctuates then you might want to check out the article about Living Paycheck to Paycheck, but I’m guessing most of us know just how much we made last year (and don’t we wish it were just a bit more).

Establishing your means was the easy part. This is the hard part. I don’t propose that you just kind of estimate, or guess what your expenses were for the last little while, and then decide whether you’re living within your means. I suggest you do look backwards at your check register or bank statements and (unfortunately) credit card statements, to get a general idea of where you were at with your spending. But all that’s really important is the future lying before you. You need to get in the habit of writing your purchases down. That’s the only way to live within your means for the long term.

With new software and online programs devoted towards personal finances, I’ve seen this new “feature” that actually records the transactions that you make using your debit card. Then, all you have to do is allocate what you’ve spent into different spending categories. This may not be good if you really have a problem hanging on to your money.

I’ve said this before, and I’ll say it again. Money management is 90% psychological, and when you have to record every purchase you make then you will naturally spend much less (i.e. begin living within your means). When I was in high school I tried this. I simply wrote down on a lined piece of paper everything I spent for a month. I was shocked at how high the number was. The next month I spent half that amount! And the next month it dropped by another 25%. Oddly enough, I didn’t feel like I was missing out on anything. Naturally, I had much more discretionary income in high school, so such a drop was realistic. However, to see a 20% decrease in your spending once you begin recording all of your purchases is not uncommon. Congratulations on your new raise.

After not recording what you spend for a few decades, it can be a bit difficult to just start right off the bat. I know of no other way though. It’s much like the attempts my wife and I make at limiting our dessert intake. We say we’ll just have one per week, or maybe one per day, or whatever – but that never seems to work. The only time I’ve ever successfully managed to avoid desserts was when I avoided them completely. It’s the same with recording your expenses. Record all of them. Don’t let one slip through the cracks. Certainly a few dimes for a soda are not going to matter to your pocketbook. It will affect your habit formation though – and that’s where it counts.

So record your expenses for a month to see if you truly are living within your means. Work toward a lifetime of living within your means. You’ll be hanging out with the minority – but it feels nice.

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)

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