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.
DG says
Josh,
Would you be willing to share your thoughts on simplifying gift giving? It would be very helpful with holidays fast approaching.
Many thanks,
DG
P.S. Thank you for writing this blog.
Iqbal says
I agree with you, its clear that the first option is the best. But in reality some people will take the risks to choose the second option. The example of this might be a wedding ceremony. In some place some people would like to have a big wedding ceremony although they have to take a debt while they actually can have a simpler ceremony and free from the debt.
Craig says
Totally agree with living within your means
Sometimes life throws you a lesson, expect the unexpected
20 years ago i signed up for a new house and was moving in, My wife had just given birth to our first daughter and i became unemployed all in the same month.
Eventually everything worked out fine, but i always remind myself of this life lesson when looking at buying items that are a luxury and not a necessity, if you can’t afford it don’t buy it
Really enjoy reading your emails each week and peoples different point of views on the topics, i tell everyone here in Australia about the minimalist movement
Chris says
I agree totally with living within your financial means. I was raised that way. When I married after college my husband was a spender. I lived in financial anxiety for 30 years. After he passed I got out of debt and now spend within my means with savings. There are no words for the calm I feel.
Liz says
It is challenging to live within your means without being seen by others as being cheap. I have always lived frugally as I was a single parent raising two children without child support. Now that I’m retired I still watch my spending as the cost of living goes up yearly. I wish there was more positive messaging on living within your means but unfortunately our society is based on capitalism consumerism.
Karen T. says
I’ve gotten so I can ignore advertising pretty well, but like you I am sometimes given the label “cheap.” It comes from family members, some of whom make more than we do and some who I’m pretty sure are drowning in debt. No matter the situation, when we make choices that let us live below our means, someone else may decide to take it badly (possibly our choice makes them feel guilty, I don’t know).
However, one result of living below our means is that we have plenty of savings should a need (ours or someone else’s) arise. We heard today that a fire destroyed the home of one of my husband’s colleagues. His employers are organizing some help for this family (they escaped with nothing but what they were wearing at the time), and I am feeling so blessed that we can afford to give generously!
Accidentally Retired says
We’ve always chosen #1. To live off of less than we make.
And because of that simple choice, we were able to retire early.
It’s not that complicated, but you need to accept that you cannot keep up with the Joneses. Someone will always have more.
Live off what you have and save as much as you can. Eventually you’ll have more than you know what to do with. And you’ll be happy too.
Loretta Mazzola says
Thank you for this Joshua. I was in the supermarket today thinking how blessed I am to be able to buy what is needed without worrying that I can’t afford it. After so many years of living above my means, or just not having enough to go around, I am finally at a place in my life where I live “below” my means. I don’t go out much and try to buy what I need, not much of things I want so I am able to save enough money to go on the vacations I enjoy. When I go on vacation, everything is paid for before I go and I have saved enough spending money while there. That is a good feeling! No debt.
Ee Laine Lee says
Yes! I tell people “do you know how I know I’m rich? I can buy anything I need or want at the supermarket without looking at the price tag”. That’s the kind of calm I have in my life. And yes to saving first to afford a holiday. I don’t understand how one can truly enjoy a vacation knowing you’re in debt for it. In that case, staying home without a debt feels like the better vacation.
Susan says
I have a friend, 70, with a nice house in my CT town, and one on Nantucket. She never worked, and has 6 children. Her husband started a foundation years ago that received lots of gov’t grants, etc. Her husband is now in jail for embezzling $ from the foundation for things like: paying for one daughter’s wedding, cosmetic surgery for himself, etc. This is what boggles my mind, though: my friend is in complete denial that he is guilty. This, despite the fact that at 70, they still have a mortgage on their house b/c they took out second and third mortgages to pay for private school for their children, and she once told me they never had more than $2,000 in the bank. I was bowled over. I grew up on welfare and have always, always viewed $ as safety, security, and not as a means to show off or live extravagantly. No car, no vacation, no house, is worth a life full of anxiety and uncertainty.
Niki says
Great article Joshua. My hubby and I have been through the Dave Ramsey coarse twice and honestly could use it again. It’s a struggle to not over spend especially when you don’t budget at all. Praying for Gods guidance so we can once again get it under control!
kamlesh Sharma says
Nikki, can you tell me if Ramsey got you out of debt?
Niki says
Everything but our mortgage was paid off.
Joel says
Thank you for putting it in crystal clear perspective. I try to explain this to people and all I get back is a blank, blinky eyed, face. Or, they respond with,”Yeah…but,…”. So, I forward your emails to everyone for simplicity.
Maria Pinto says
Great article and always a timely & intelligent reminder of the choices we make. Sometimes you can get trapped in the vicious cycle of debt, but getting out from under is so far out! (I still love this phrase), and to simply pay off a credit card and tell them you don’t want it anymore, even as these corporate vampires try to suck you back in, well bah humbug to them!