If you live within your means all your life, when you retire you should be quite well-off and be able to live very nicely. Living within your means does not mean being a cheap miser!
I decided to go the other route and grow my earnings out of my spending habits to start saving and that worked great for me. Fortunately I only modestly increased my spending every promotion and now sock away more every year than I made annually 7 years ago.
Ping
Parents lived thru depression. Brought us up to live below our means. Have followed their advice. No debt. Paid mtge off 15 years. Buy cars cash. First job 1.60 or 1.65 hr. Cashier part time in college. Got 5 cent raise when min went up. Took home 20 wk. When cashed ck put $5 in bank. No atms.
we’ve always lived below our means. Hubs got to retire early. He has a part time job now which he loves.
Wealth is nothing more than money that was saved or invested in assets.
People who spend every dime they can get their hands on on Escalades, bling and hoes will never have wealth no matter how much of other peoples’ money you give them.
I was born in 1949. My parents and grandparents went through the Depression. This was a difficult time for them and credit was nearly unheard of for average people but people with money used credit and it was their demise.
My grand mother told me one day as we drove through a neighborhood with very large expensive homes that “these people, most of them are only a paycheck away from ruin.
I appreciated her wisdom and lived like her until marriage when my wife believed you got ahead and were able to more enjoy life with credit. the credit card balances would get scary but she would counter with “ you only have to pay the interest”.
As I would cancel a card she would open new ones, when I would find out I would cancel the card and start paying off the balance, it was hell.
We were married for 25 years when I couldn’t stand it any more, after several marriage councilors who thought I was crazy by wanting to live within my means we finally split.
A couple years later I met another woman who liked to live within her means. After giving my ex over a quarter million we were actually saving money. We were able to pay off our home and buy several others as rental and a Florida vacation home besides.
The difference in stress and satisfaction, feelings of security etc. is impossible to describe. We have more and enjoy what we have. I have never made a lot of money but have always wanted a Corvette. All that interest I saved finally bought me one. I have always wanted a nice camera and lenses, all that saved interest and wasted money finally bought me one.
Get out of debt. When you have plenty of money in the bank life is just less stressful, you don’t worry about how you are going to make the next payment. I don’t owe anything to anybody, no interest. My biggest expense each year is taxes and I just write a check.
Do it to be happy, get out of debt.
My wife and I have practiced this our whole lives.
We both made a choice to go to state colleges and commute so we wouldn’t be saddled with debt. (I chose on the basis of what the GI Bill would best cover)
When we married, we bought, and still live in a small three bedroom one bath ranch.
We used old furniture until we had money saved, and then bought things we liked.
We have saved enough to use cash to buy a new car when we need one. We pay off our bills each month. We paid off our mortgage about ten years ago.
We have been able to save enough to care for ourselves, even if the danged country will go broke and make our savings meaningless, at least we took responsibility and tried. Can’t do more than that...
We made a conscious decision early on to save, buy bonds, etc. We were lucky. Not everyone can do that...and a lot of people do live from month to month on paychecks, and the first flat tire they get is a disaster...how to pay for it.
I had to learn to live within my means when Mr. Redhead passed away in 2005. I have been on a fixed income ever since that has NEVER increased by more than a dollar or two (Social Security) until this year. Learning to live on half the income I was used to has taught me a lot of things. Self-discipline, frugality, the old World War II jingle of “Use it up, Wear it out. Make it DO, or do Without.” I made some wise investments at the time that have given me the confidence to go ahead with life. Not much, but enough. Living Within Your Means means just that.
I taught my kids that interest is an amplifier.
If you’re in debt, interest is a force that takes you further into debt.
If you save, compound interest is a miracle, dramatically increasing your wealth over time. So start saving now.
Quite simple, really.
Dave Ramsey’s “Millionaire Theme Hour” is full of them.
The book “The Millionaire Next Door” had many, too. Not every millionaire played good offense with a big salary or invested in their business. A fair share simply saved 10-20% automatically, then lived off the rest.
What was interesting about “Everyday Millionaires” by Chris Hogan was that the share of millionaires who followed that advice became the majority. The tax advantaged 401Ks and IRAs meant that most millionaires were people who simply saved 10-20% to retirement and other accounts, then lived off the rest. In comparison, 25 years ago in “The Millionaire Next Door”, nearly 2/3 of millionaires were running their own (usually blue collar) business.
That means most millionaires today achieved that by living within their means.
Congratulations! Well done.
“Rich people control their cash flow.”
- Robert Kyosaki
Thanks to my wife, who makes Dave Ramsey look like a spendthrift, and having no desire for toys or the high life, we were able to retire debt free. This allows us to live modestly on social security without tapping a modest nest egg. We even were able to financially survive two medical crises. Our frugality comes from the values of our parents who experienced the Great Depression. That said, we realize the state of our financial security in retirement is fragile and all could be wiped out in the blink of an eye.
We’re on Baby Step 6 of Dave Ramsey’s plan. Talking to the teens, we were able to say you don’t need to fill out the FAFSA, though we appreciate you applying for scholarships. But I don’t need to attend the college loan application session they were inviting my firstborn’s class to because we don’t need it.
Then had to discuss expectations and requirements with firstborn. We can pay for school if state school and you live with us. We’ve already discussed her career plans, how she can get that degree and certification, and schools that have decent programs. But this is not a blank check to attend a private school for four to five years.
Unfortunately I came upon Ramsey late in life, around 50. Put my foot down at that point and said no mas. Paid everything off, house, car, CCs etc. Once debt free, I felt like I got a 10% raise because the money I was spending on interest, amounted to that at least.
20 years later I have all I could almost want as I have a chunk of money in the bank and investments rather than using CCs to quell any problem. I still use CCs but pay them off each month no matter the balance. We also decided to not support the car companies and drive older cars and plan to do it till the wheels fall off!
Many people confuse a Budget with Cash Flow. A budget is where the money is going out every month, regardless of when it goes. Once you establish the budget, then you work on the cash flow.
Most people are also backwards on savings and credit. Credit is for emergencies (i.e. spending money you don’t have). We tend to use credit like cash. We buy “things” with it. Don’t buy things with money you don’t have.
Example: My sister had a $1,800 hospital bill. I told her to borrow the money and pay it off. Instead she paid them half of what they asked every month and they sent her to collections. Now she’s owes $3,000 and she will owe that $3,000 until she dies.
My kids are always telling us to get a new car because we can afford it. I tell them over and over that’s it’s harder to spend money you have in the bank than money you’ve yet to earn. Earning and saving gives one a real appreciation of the value of money and makes you frugal. Debt is an insidious trap and should be used sparingly. Now that my wife and I are debt free we are reluctant to spend for anything but actual necessities. The psychological security of having money means more to us than the crap we could spend it on. And consequently our wealth grows rather than diminishes.
Mrs. K and I are Financial Peace U. Coordinators. The baby steps are a great way for people who are stuck, hopeless and don’t know what to do next to start getting out of debt. Most people don’t have an income problem they have spending problems. (They think they’re in Congress). We have always lived on less than we made and are happier for it.
The biggest problems we see in classes are ridiculous car loans and restaurant/fast food spending, people see nothing wrong eating out 20 times a week. They are eating their retirement. College loan debt is coming up fast on the outside.
Poor people pay interest, rich people make money off interest.
Weak minds are easily kept in chains by slick advertising and the hope of the next greatest thing that will bring them joy but never satisfies.
We now max out our 401Ks, and have been making up on lost investment dollars with a stock strategy that let me grow what was there by six-fold in five years. That made up some lost value to interest over the years.