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I think a substantial chunk of the financial crisis the nation is now in is due to people not living below their means - they buy more house and car than they can afford, take extravagant vacations, upgrade their TV to the newest 107" plasma model, etc.
I'm curious to know how many people consider themselves to "live below their means", and exactly what does that entail for you. For those that do live below their means, IYHO, to what extent have you been affected by the uber-crisis?
I think a substantial chunk of the financial crisis the nation is now in is due to people not living below their means - they buy more house and car than they can afford, take extravagant vacations, upgrade their TV to the newest 107" plasma model, etc.
I'm curious to know how many people consider themselves to "live below their means", and exactly what does that entail for you. For those that do live below their means, IYHO, to what extent have you been affected by the uber-crisis?
Hi juggler,
I have lived between 25-50% below my means for some time. However its a bit more complicated than this. Most people price in inflation into their decisions and were also misled that housing was an investment. The best way to dodge taxes was to buy houses with debt to acquire an inflation hedge with a tax deduction. Most people actually have their credit card debt under control. This was a housing sucker punch the average person did not see coming because they don't really understand our money system.
The fundamental problem is our money supply is designed to inflate on a steady curve until a crash occurs.
We believe we live below our means because we manage to pay bills, taxes, contribute to retirement, and still have a good chunk of money for our savings every month.
This may be hard for some to fathom but in our situation we actually did worse financially being a two-income earning family than we do now as a one-income earning family. When we both worked demanding jobs neither of us had time or energy for much outside of work and it meant we took several shortcuts such as buying prepackaged food or take out, buying paper & plastic utensils to fend off even more housework, book shopping at Amazon to avoid creating yet another errand (to the library), utilized dry cleaning services, etc. Some of our two-income earning friends also utilize housekeeper, gardening, and grocery delivery services. And those with children need to use daycare. For us, both of us working also meant shopping around our schedules as opposed to the sale schedules. We were also more reliant on vehicles and gas.
Being a one-income earning family has allowed one of to manage the home better by cooking almost everything from scratch, shopping around sales schedules, including library runs with errands, and completely keeping up with housekeeping. That alone has saved quite a bit of money. Years ago we also moved within walking distance to the one-income earner's work and manage on one car. There is quite a bit of savings there too. The non-financial perk we discovered is that overall we are both less stressed, less sleep deprived, and way happier. Now this arrangement works extremely well for us, where it might not work for others. It really comes down to what that one-income earner can make. The downside is that we do have to pay much more attention to retirement funding seeing as one earner has to cover contributions for two people.
The current crisis has affected us minimally compared to other people we know. Basically we're just dealing with the slight increase in our grocery bill and the diminishing interest rates on bank accounts and CDs. Even though neither of us commute by car to work, we feel the pinch with fluctuating gas prices when we do errands. This is all I can think of at the moment, but perhaps there is more.
I absolutely live within my means. My apartment is somewhat expensive, but it includes all utilities including WIFI. My car is paid for, thanks to a couple of good tax returns, and I don't buy anything on credit. I also have a couple of older teens who I still help out financially. Maybe once they are more on their feet....I'll waste money on ME .....but I would never live beyond what I can afford on almost a totally cash basis.
i live below my means. i cant afford nuttin and i was jobless for a few months. even now with a job i cant afford anything and have no transportation to work only my feet which sucks when its 3 degrees outside, i havent had any money leftover since may 2008. i live on bare essentials, yet, i still cant afford anything. internet is the only luxury i have besides basic cable. i have student loans out n credit card debt. good thing the payments dont start til the end of 2010.
I think a substantial chunk of the financial crisis the nation is now in is due to people not living below their means - they buy more house and car than they can afford, take extravagant vacations, upgrade their TV to the newest 107" plasma model, etc.
I'm curious to know how many people consider themselves to "live below their means", and exactly what does that entail for you. For those that do live below their means, IYHO, to what extent have you been affected by the uber-crisis?
My DH and I live well below our means. We didn't always since we like to have nice things as much as the next person but we didn't go overboard either.
We can currently qualify for an additional $150,000 towards a mortgage but have elected not to go that high. We carry no credit card or personal debt and both of us have significant $$ socked away for savings, investments and retirement.
Both of our parents beat it into our heads to save for a rainy day and we follow that mantra faithfully. We are comfortable in the knowledge that if both of us lost our jobs, we could live off our savings for several years, without imposing on family or friends.
The economy has still had a strong impact on us though. I was laid off of my job and am looking at working several years longer than I had planned to make up for the financial set-back but, guess what? I'm a worker, not a slacker and I WILL climb back up out of this countries economic crisis a stronger person.
I hope the folks who were financially irresponsible will learn from their mistakes. Not saying everyone who lost homes or carry debt are irresponsible but too many were and it has cost them and us. Just because the bank says they'll give you the money doesn't mean you should take it.
I don't think the majority of Americans live above their means. I think a lot of people like to pride themselves on bulletin boards and pat themselves on the back about it though.
Personally IMO a select group who got mortgages and were either misled or chose to ignore the fine print do, but the foreclosure rate is still less than 2%. Hardly "most Americans".
We believe we live below our means because we manage to pay bills, taxes, contribute to retirement, and still have a good chunk of money for our savings every month.
This may be hard for some to fathom but in our situation we actually did worse financially being a two-income earning family than we do now as a one-income earning family. When we both worked demanding jobs neither of us had time or energy for much outside of work and it meant we took several shortcuts such as buying prepackaged food or take out, buying paper & plastic utensils to fend off even more housework, book shopping at Amazon to avoid creating yet another errand (to the library), utilized dry cleaning services, etc. Some of our two-income earning friends also utilize housekeeper, gardening, and grocery delivery services. And those with children need to use daycare. For us, both of us working also meant shopping around our schedules as opposed to the sale schedules. We were also more reliant on vehicles and gas.
Being a one-income earning family has allowed one of to manage the home better by cooking almost everything from scratch, shopping around sales schedules, including library runs with errands, and completely keeping up with housekeeping. That alone has saved quite a bit of money. Years ago we also moved within walking distance to the one-income earner's work and manage on one car. There is quite a bit of savings there too. The non-financial perk we discovered is that overall we are both less stressed, less sleep deprived, and way happier. Now this arrangement works extremely well for us, where it might not work for others. It really comes down to what that one-income earner can make. The downside is that we do have to pay much more attention to retirement funding seeing as one earner has to cover contributions for two people.
The current crisis has affected us minimally compared to other people we know. Basically we're just dealing with the slight increase in our grocery bill and the diminishing interest rates on bank accounts and CDs. Even though neither of us commute by car to work, we feel the pinch with fluctuating gas prices when we do errands. This is all I can think of at the moment, but perhaps there is more.
Every year when I do our taxes I realize that what you say is true. My husband and I both have great incomes, but as I enter information in on Turbotax I see us go from a big refund we would get with only my husband's income, to a huge tax debt when I enter my income, to down where we only have to send a check for $1000 or so with our taxes (I'm self employed) after I enter business expenses and itemize deductions. I keep wondering what if one of us DIDN'T work? We might be just as well off. I thought we had it made this year because we had paid a lot in state taxes, a lot in real estate taxes, and had a lot of medical expenses. Nope - it was "too much" of a deduction so we aren't going to be able to claim it all and got hit with AMT. Can't win!
On the OP's question - we have spent years living above our means, but in the summer of 2005 we changed course. We had a vacation scheduled for September. We canceled the vacation and started paying down debt. We've made great progress, but just throwing any extra money we had toward the debt, not really living with a budget. Last weekend I was going through bank statements, etc. for taxes and it's shocking to see how much money we spend on frivolous things, eating out, convenience food etc. like jaindow says. Talked to my husband last night and we are going to sit down and decide how much we each need weekly for lunches/discretionary spending and how much we want to allocate for groceries/eating out. We are going to take that out in cash and refrain from using our checkcards here and there and everywhere like we are used to doing. We just spend too much money that way on NOTHING! I've spent the last week making it a point NOT to use my checkcard and it's amazing how much difference it makes - the balance stays the same instead of dropping every day. Both of us are used to just whipping out the card whenever we want something and it does add up fast. I figure if we each have cash that puts a cap on what each of us is spending each week. Same with food - we might buy groceries and then also spend $50 to $100 a week eating out. If we set a limit on how much we are allocating for food, then once we spend that we're done. We'll still eat out, but we'll think about what we are spending rather than just spending money randomly and not paying attention to how much we are really spending.
We definitely live below our means in regard to our house. We could "afford" a house that is two or three or four times the value of our current house, or at least the mortgage calculators would tell us we could afford that. We choose to stay in our modest house. The last new vehicle we bought was in 2005 and plan to keep it and drive it till it dies. We are repairing DH's vehicle rather than trading it in for a newer one. When we buy our next car it will be with cash.
I have gotten away from using grocery coupons but I am going to start again. Basically what I do is clip the Sunday paper coupons and shop at a store that doubles coupons. I ONLY buy what is on sale that I also have a coupon for, and I stock up. Then I plan meals from my stockpile rather than planning menus and shopping for food at full price. The grocery store sales run in cycles that correspond to the coupons that are in the Sunday paper. Usually in the course of 6 weeks everything is on sale. No coupons for meat, dairy and produce, so I buy what is on sale that week and freeze it. It takes about 6 weeks to get stocked up enough to be able to plan meals from the stockpile. It is REALLY worth it when you really get into it. It takes a little longer to shop because you are going down the aisles comparing sale items to coupons you have - and you have to do that because the flyers the store puts out does NOT include all the sales. Every week there are lots of unadvertised sales. The time factor is what has made me slack off, but with grocery prices increasing I am starting again...
One thing to remember - a dollar saved is MORE than a dollar earned. If you are able to save a dollar you have saved a whole dollar. If you earn a dollar, after federal and state taxes and sales taxes, you might have 50 cents left. So I figure it will do me more good to cut back/spend less than work more/spend more.
We have lived 30-50% below our net income for our whole married life. It provided a paid off house, significant investments, and as much security as we want for our retirement.
We choose what to spend our money on and always save first and spend second. We could have afforded a huge house and new cars, fancy fashion, etc. But we decided that an early retirement was much more important. It helps that we both hate paying interest to others for the use of their money and enjoy the simple pleasures.
Last weekend I was going through bank statements, etc. for taxes and it's shocking to see how much money we spend on frivolous things, eating out, convenience food etc. like jaindow says. Talked to my husband last night and we are going to sit down and decide how much we each need weekly for lunches/discretionary spending and how much we want to allocate for groceries/eating out. We are going to take that out in cash and refrain from using our checkcards here and there and everywhere like we are used to doing.
Luzianne - I kid you not, that was THE #1 thing we did that finally set us on the right track! So BRAVO! The approach made us think twice about what we were buying, reevaluate needs versus wants, and actually focus on the value and quality of consumer goods. Then when we saw our savings build, it became addicting to save.
And when you know you are saving well, then the occassional splurge is not so bad either.
Quote:
Originally Posted by luzianne
When we buy our next car it will be with cash.
Same here!
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.....but I would never live beyond what I can afford on almost a totally cash basis.
