The Falsehood of "Living Within Your Means"

You hear it time and again from the financial experts. Live within your means and all will be okay with your finances. While living within your means is better than living beyond your means, it doesn't address your future saving needs. If you get paid $2000 a month and spend $2000 a month, you are living within your means, but you aren't saving a cent for a rainy day. The true way to get and stay out of debt is not by living within your means, but taking it a step further and living below your means.

There seems to be a negative connotation with the phrase of "living below your means" for many. It conjures up the image that you must give something up that you could have if you wanted. Most people think that "living below your means" entails extreme sacrifice and scrimping and scraping just to get by. The truth is that there is a simple way to live below your means without changing you current lifestyle if you are already living within your means.

One of the best ways to maintain a "living below your means" cycle that you can use for the rest of your employment life is to simply live a pay raise behind. Instead of adjusting up to your higher income the next time you get a raise (what most people do when they receive a raise without even thinking), continue to live on the money you had been living on up until the raise and place the difference into savings or reducing debt. Since you are living as you had been, there is nothing you have to give up or sacrifice when approaching living below your means this way.

For example, if you're earning $2,000 a month and get a $100 a month raise to earn $2,100 a month, you'd continue to live as if you were only earning $2,000 a month placing the $100 raise toward debt reduction or savings. Then if at a later date you get a raise of $250, you'd budget your living on $2,100 with the $250 going to savings or debt reduction. This way you're always living on the money from one raise behind and below your means without ever having to make the sacrifices of cutting back.

A simple way to accomplish this is to set up a system where the extra money from the most recent raise is automatically taken out of your normal spending account. When the money from the raise is mixed into your regular spending account, it'll more than likely get spent.

There are a number of ways to do this. Probably the best is to set up a banking account where you direct deposit your paycheck and then have a specified amount automatically sent to the debts you are paying off or into your long term savings account. You can set up an account with this service at most banks or credit unions.

By deciding to live one raise behind, you can live below your means without it effecting your current lifestyle while paying down your debt and saving for your future.

Copyright Jeffrey Strain and SavingAdvice.com 2003 - 2005, All Rights Reserved.