There are two ways to live life:
1. We can live in a way that we spend less than we make.
2. Or we can live in a way that spends more than we make.
I suppose you could argue there is a third way: Spend exactly the same amount as you make. And that may be true, but unexpected emergencies happen all the time. Spending exactly the same as you make only lasts until your next financial emergency—and then you’ll find yourself squarely in the second group.
It would seem, looking at the options, most people would choose the first. The stress of constantly living in debt, of constantly being held hostage to your past, of even living with a sense of fear or panic is a way of life that nobody desires.
Spending less than we make is the option people would rationally choose. But most of us don’t.
In fact, roughly 60% of us spend more than we make.
Here are the statistics:
60% of Americans could not pay for a $1,000 emergency expense.
77% of Americans report feeling anxious about their financial situation.
And the numbers are only getting worse.
Why is that? Why is a life with less stress and worry so difficult for so many of us to attain?
Why do most people choose to outspend their income?
There are some who will argue that the system is rigged and it is simply impossible to make enough money to live within your means. Of course that may be the reality for some, but it’s certainly not the reason for most. And most importantly, it’s likely not the reason for your choices.
More likely, the reason so many choose to live a life outspending their income is because messaging and marketers are constantly telling us that we’re missing out by not spending more money.
Consider this: you can’t turn anywhere inside a civilized society (nature may be the only exception) without being bombarded with advertisements promising a better life than you’re living… if, and only if, you are willing to spend to get it.
We’re promised a better life by spending more with almost every turn of our head.
The promise is so ingrained in our subconscious, from the moment we are born, that we subtly and unintentionally fall into the trap.
An increasing income doesn’t quench the desire. Offers for a better life only grow with our income… nicer cars, bigger houses, fancier meals, more luxurious vacations… the temptation to overspend never, ever ends.
The promise of a better life always lies just outside our current income. So we chase it, endlessly—always spending just a bit more than we have.
But it is better to live cheap under budget than to live luxuriously in debt.
Living within your means results in a self-satisfaction that cannot be purchased at a department store.
It results in a restful calm at the end of the day that can never be experienced at the fanciest hotel.
It results in a genuine self-confidence that can never be purchased on a clothing rack.
It results in an ever-present enjoyment that can not be duplicated with a fancy vacation.
It results in an example for your family that can never be purchased with self-help courses.
And it results in a life well-lived with fewer regrets.
The world will tell you spending more is the key to a better life.
But I can attest, it is better to live cheap under budget, than it is to live luxuriously in debt.
Danna Galan says
I am 33 years old with two daughters of age 10 and 6.
Husband is the main money maker paying the majority of our bills.
Rent $2700 a month.
Electricity roughly $350 a month
Water roughly $300 every two months
Cable and internet (including Netflix, Prime, Disney+) roughly $300 a month.
Cell phones (4 lines because I pay for my 72-year-old moms cell phone) $180 a month- this is after switching to Xfinity mobile. Before we had Verizon, and our bill wouldn’t be any lower than $400 a month.
Car payment $590 a month
Insurance $300 a month, our most luxurious expense is what we enjoy the most as a family which is our RV and that is $1029 a month including insurance. add all that up $5,749 a month to just live. not including gas, not including groceries.
Husband and I just decided that we need to live a simpler life and agreed to get rid of everything in our 3-bedroom home and move into our RV, downsizing from a 2000 + square feet home to an RV that is about 420 sq feet. We use our RV every time our kids are off from school meaning we take vacations at least 3 weeks out of the year and then the RV is just sitting there not being used. We love to travel and when we are in the RV, we are the happiest. Low maintenance because I can literally clean the RV in 30 minutes, when I have to clean our house, I feel like there is never an end to it. By the time I have finished cleaning a section of the house and move on to another section, I have spent 2 to 3 days cleaning and have to do it all over again.
We are giving away our furniture to family and friends that need it or want to keep our furniture and getting rid of more than half of our bills.
It took some time researching what was our best options. Moving into our RV which we knew we did NOT want to get rid of, was the smartest decision we have ever made in our life.
Our projected expenses now will be:
RV and Insurance -$1029,
Cell phone $180
Car and insurance. $590+$300=$890.
We want to keep our internet and cable subscriptions for the time being adding – $300 a month.
Campsites in South Florida are extremely expensive but even then, we are looking at $1415 a month including water, electric and sewer.
When you add all that up our expenses are now $3814 a month.
Not only have we made ourselves less stressed out and feel less pressure when those bills start coming in. We are much happier and actually get to spend a lot more time with our daughters than we did when we were at our house.
Now for those who like to do math problems, we have reduced our spendings by $1935 a month. That money can be used now for our daughters’ educations, more family adventures and travel.
I didn’t add gas or groceries because those expenses vary week by week.
I truly cannot wait for the adventures that are yet to come.
Lorna Selwood says
Thank you . I agree . Every Blessing .
I can attest to this as well for so long I fought with my lifestyle changes only because others around me made fun of me and I jus kept thinking I can’t possibly be the only one. I read a book called meet the frugalwoods that was so mind blowing then another book Mary hunts live your life half the price and then I stumbled upon you and your blog read your free ebook. I was finally at ease like wow there’s others like me. This was in 2019 fast forward to this past two years I’ve read a blog post every weekend follow others on YouTube. I’ve read your book the more of less and this lifestyle has made me so free and whole I can’t wait for spring to come for the second book release
Aloha Joshua, I am so happy to have crossed paths with this article. I’m a financial coach & I teach about budgeting, credit, smarter banking, & debt elimination. The real tools we need in life. The reality is that there is a lack of financial education. No one teaches us how to bank & its surely not taught in schools. We’re taught to graduate high school, go to college (take out loans) or work, and get a good paying job. But once you get that job what do you do with the money? We all just have to figure it out. One person has an envelope system, another utilizes a credit card, another one hides cash under the bed. These are all systems that we create ourselves & most people fail because finances are stressful. You must have a system in place. Create a budget. Know your cashflow. Know your credit. Create realistic goals. Create detailed financial projections so that you control your money instead of your money controlling you. You have to run your personal finances like a business & you are the CFO. Hope this helps anyone reading this.
Dividend Power says
The statistics are not good but many people cannot stop the cycle of debt.