Living Within Your Means

The second item on the list of Habits of Successful People is: they live within their financial means.  Statistically they allot 25% of their income to housing, rent or mortgage.  15% to food.  10% to entertainment.  And 5% of their net annual to holidays/vacations.  I can tell you from my wife’s previous occupation of financial consulting, that the vast majority of people do not live within their means.

A Huffington Post poll revealed that only 10% of Americans are living below their means or spending less than they make.  Why is this so and why is it important?

Successful people guard two things with serious conviction: time and money.  They understand the importance of financial responsibility and freedom.  When I first started writing the Dream Big blog I was not sure where I wanted to go with my writing, but that was clarified for me when I compiled the list we are working through now.

In the U.S. people make one fatal financial mistake: they fall for the lie that everyone has to have credit cards.  We are led to believe that it is normal and okay to accrue credit card debt, which leads most down a destructive road.  I have written about this topic a lot and learned that the average credit card debt per household in the U.S. is just under $15,000.

c92470c3e7607e72fa3a9405066e4a5dSo why is living in your means important?  When you spend less than you make and do not rack up debt, you allow yourself freedom and mobility.  What I mean is you have the freedom to switch jobs or occupations if your current situation makes you unhappy or unfulfilled!  So many people I speak with about starting their own business or changing jobs simply cannot take a job making less money because they owe so much money; they have massive debt.

So what do you do if you have stacked up huge debt?  You must begin immediately assessing the damage and take action to pay the debt off.  I recommend making serious sacrifices for a couple of years in order to pay down credit card debt.

My list of recommended cuts are as such:

  • Pay television, cable, satellite,  internet based.  The average pay television bill in the U.S. is $123!!  And most shows can be streamed for free!  Plus there are better things to do with your time.  Just sayin.   Estimated savings per month (ESPM)… $123
  • Shopping at premier stores.  Swallow your pride and start bargain hunting!   Marshall’s, TJ Max and even thrift stores are great ways to get what you need at a fraction of the cost.  ESPM…$100
  • Stop smoking and drinking.  Not only is this good for your budget your lungs and liver will both thank you!   ESPM…$150
  • Eliminate eating out.  Look at eating out as a luxury, one that you can no longer afford!  For special occasions find a nice, inexpensive spot to dine.  My wife and I found a great Chinese restaurant that we can both eat for under $20.  ESPM…$100
  • Elaborate entertainment.  If you have credit card debt I can safely surmise that a large percentage of the balance is due to entertainment you could not afford in the first place.  Get creative when planning family entertainment: go to the park, rent a DVD from Red Box and have family movie night, attend a free music fest.  Entertainment does not have to be a $100+ night at the theater.   ESPM… $200
  • Starbucks or coffee-house.  This is a personal peeve of mine as I know lots of folk that have a $70+ coffee habit each month.  Buy a good $9 bag of coffee and brew at home.  ESPM… $50
  • Memberships.  Gyms are the worst investment known to every financial counselor.  Every one of them had this at the top of their lists.  Buy your own weights, run outside and stop wasting $75 each month.  ESPM… $75
  • Magazine subscriptions.  No explanation needed.  ESPM… $20
  • Car payments.  If you have more than 1 car payment, you are handling your money foolishly.  Automobiles depreciate.  One financial advisor said to me, “finance assets that appreciate, but never finance assets that depreciate.”   Rework your current auto situation and eliminate 1 or more car payments!
    ESPM… $350
  • Name brand groceries.  I shop at Aldi and love it.  My wife is amazed at what we get for the money.  ESPM… $200
  • Misc. waste.  Most people have a couple hundred dollars each month that simply vanishes.  Well, find it!  Keep all your receipts for a month and identify any holes in your ship.  ESPM… $150

Once you have eliminated unnecessary spending take the surplus and combine it with your minimum payment on your lowest credit card debt.  Imagine how quickly you could pay off $5,000 if you were paying $600 to $1000 per month!  Once you have paid off the first card, apply your total payment from card 1 plus the minimum from card 2 and hammer that debt down.  You proceed in this fashion until you have paid your credit card debt off.

I have talked via email with a few people who decided to pay themselves out of debt.  They all said the sacrifice was so worth the freedom and relief they felt once the debt was paid off.  I strongly encourage you to take a look at your finances.  Do not tell me you cannot find extra money because I know most people can.

Make a short-term sacrifice for a long-term gain.  You will thank yourself!

Big Dreamer


40 thoughts on “Living Within Your Means

  1. You forgot to add “stop believing the lie that stuff will bring you happiness” … Consumerism was invented after WWII to maintain the industrial capacity built by the war. Check out the video “The Story of Stuff”

    1. Very good point! I almost delved into this topic but didn’t want my post to end up at 2000 words! lol I edited that part out and hoped most would understand that attitude contributes. Thank you for adding it to the comments!

  2. I totally agree with your suggestions especially on the coffee habit, due to savings I have managed to save up for a very fancy coffee machine which even makes better coffee than the store bought one. Just a small remark on ALDI ( I am from Germany) although ALDI is very good for basic products, their choice is limited and quality of meat is not always how you should value your personal nutrition. They put a huge among on pressure on producers as they squeeze the prices until there is not much left. I strongly believe that we have as customer ethically and morally responsibility both to producer and also to product (aka animals) so better to support others in this particular field. But in generally I think you have touched with your post a very important point in everybody’s life. There might be also additional solution: instead only to cut spending also to maximize your resources. I have been looking how to maximize my credit card advantages, if you interested you can find out more here

  3. I have had the same credit card for 14 years, it is the only one I have and it has only a $1,000 limit. I got it when I was 18 for buying gas and tires for my car. Now I only use it if I want to buy something online.

    1. Very smart! My wife has dealt with people in her previous business that had $20,000-120,000 in credit card debt! I could not imagine that stress!

  4. I like to not have a credit card idea too and I don’t have one because of my bad credit history- no job for almost 2 years. Now I don’t want to take one, though I have a job but as Florida Life above says, for online purchases you need a credit card and debits are not accepted. What do I do ?

      1. Prepaid Visa cards can be used anywhere the Visa logo is accepted, including online. All of this according to their website…just googled it.

  5. I love this list. These are all truths to live by. It’s so important that we realize how powerful we can be over our credit card debt. It’s not worth it and we can happily survive without these things. Great post!

  6. These ideas are great to live for and when the debt are paid, it can be possible to live for less and then make a saving for either a big wish or unexpected bills. Also usable to get more freedom in life.

      1. Wow! You are so kind to do that! I try my best to encourage people to be the best for themselves! It means so much to me to have your support! You INSPIRE me!!

  7. It is a good idea and I was doing that until my disability took me out of work and onto disability pay. Now I live rent-free with my dad until he passes and use my little bit of diability pay to pay off the credit cards I racked up due to trying to live on disability. With all of my medical bills, food, and credit cards there is nothing left for the cards except to pay the minimum due. There is no extra every month. Nothing I can really cut out. I finally paid my car off and get some medical help from the state. I don’t get much but don’t qualify for most of the government aid. I am poor, but not poor enough.

  8. I have one credit card. It’s mainly used for deals on Kindle books and the occasional online buy. I just actually bought a pair of old school Doc Martens for $50 and they were marked down from $200.

    I haven’t had cable television in years. I find it’s not really necessary anymore. I pay 9 dollars a month for Netflix. Also, I love thrift store clothes shopping.

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