"If a man is proud of his wealth, he should not be praised until it is known how he employs it." - Socrates

I Just Can’t Live Within My Means!

By , June 1st, 2010 | 14 Comments »

The other day I heard someone make the argument that most financial advice was of no use to them because it assumes that you have some extra money, you just need to “find it.”

“I literally have no extra money,” this person said. “Every dime I have goes to the mortgage, food, or the utilities. These financial people assume that if I just cut out the lattes and the frivolous shopping that I could save money. I don’t do any of those things and I still have no extra money. I can’t pay down my debts and, in fact, have to keep incurring more debt in order to live because I make such a small income. I have no choice.”

It’s not uncommon to feel as though there is no extra money to save or pay down debt. Many people feel like they’re up against the wall financially. They feel like they have no extras, no life, and still can’t get ahead. At first glance, it seems to be a legitimate problem. There’s no money for necessities, so how can there be money to save or pay down debt? I would argue that it is a legitimate problem — sometimes.

Sometimes you run into circumstances beyond your control that force you to live above your means temporarily. Maybe you’ve been getting along just fine and then a big medical bill hits. Or you have to repair the roof right after you had to replace the air conditioner and your emergency fund was depleted from the first problem. These are things that can strike anyone at any time and unless you are adequately prepared, they can force you to spend more than you earn. Maybe you even choose to spend a lot more for a time, such as is the case when you decide to return to school so you can ultimately get a better job. However, if you were living within your means before the problem, most people can cut back for a while, catch up, and then soldier on.

But what about people who chronically live above their means and complain that there is no other choice? I would argue that this is a big justification. You may make a small income. Many people do. You many have a lot of expenses. Many people do. However, if you ever hope to be financially sound, you have to adjust to living within whatever income you do make. It isn’t easy. It may mean moving into a smaller place or to a less desirable neighborhood so you can afford the rent/mortgage. It may mean that you never own a car that has less than 100,000 miles on it when you buy it. Your life may not be that fun, but simply incurring debt for the rest of your life isn’t a realistic option, either. At some point it will catch up to you and you’ll find yourself in deep financial trouble.

So what do you do if you, “Literally have no extra money,” as the person above says? The first thing to do is to audit your expenses by writing down every single thing you spend money on in a month. Many people say they’ve cut out all the extras but upon auditing their spending, discover that there are still quite a few “extras” floating around. Maybe it’s that quick meal out you grabbed on the way to soccer practice, or the two magazines you threw in your cart at the grocery store. Maybe it’s the toy you bought to quiet your child in the store. Maybe it’s the cigarettes, lottery tickets, or alcohol you insist on buying even though you know all of them are bad for you and your finances. These things slip by unnoticed because they are part of the fabric of your daily life. However, if you are really strapped for cash, you cannot spend on any unnecessary items, no matter how much you may want or like them. You just can’t. Chances are you can find at least some money this way.

The second thing to do is to make the hard cuts and choices. It may be
time to admit that you really can’t afford the rent or mortgage on your current place and that you have to find another, cheaper place to live. You may even have to admit that you cannot continue to live in a high cost of living area and move. You may have to sell the nice car and settle for a clunker. It’s probably time to give up all forms of pay TV, cell phones, and any unnecessary gadgets. It may be time to sell some of your possessions or heirlooms to bring in extra cash. You may even have to give up a pet if the expenses are unmanageable for you. You have to get crazy about cutting your bills in every area of life including utilities, food, and clothing. When you “literally have no money,” nothing is sacred. Everything is up for sale, cancellation, or renegotiation. It hurts and it stinks, but if you have nothing to spare and every cent you earn plus more is going out every month, then some things have to go. You may have to adjust to a bare bones existence.

Finally, you can’t live like this forever. Well, you can, but chances are you don’t want to. You have to find some way to bring in more income. Maybe it’s time for a partner to go back to work, or to increase to full time from part time. Maybe you need a second job. Maybe you can do some freelance work, either in your field or in something like housecleaning, lawn care, or home maintenance. You do whatever you can (that’s legal and ethical) to bring in more money. Even if it’s just a little bit, it will help. If you can find a scholarship or employer to pay for you to go back to school, do it so you can get a better paying job. If you’ve cut your expenses to the true minimum, then your only other choice is to make more money. Yes, it’s tiring and no, it’s not fun. But it’s the only way to keep your head above water.

True story: I know a guy who never made more than $40,000 per year at any job in his life. Most of his earning years he earned between twenty and thirty thousand per year. Yet he managed to have a wife and two kids and retire with over $1 million in the bank. How? He lived very frugally his entire life. He never spent more than he earned on anything. Yes, it meant that his kids didn’t wear the latest and greatest. He didn’t live in a big house in a fancy neighborhood. He didn’t drive a nice car. It meant that, “vacations” consisted of tent camping or local outings. They rarely went out to eat, he never wasted anything, and he did a lot of things for himself rather than hiring them out. He banked every spare cent he could find including tax refunds, rebates, spare change, and gifts. When offered, he took full advantage of pensions and 401(k)’s to save for retirement. Some people would call him poor or disadvantaged. He never considered himself that way.

“I knew I earned $X amount of money,” he told me, “And that’s what I had to work with. I never thought about how great it would be if I had more money, I just made it work on what I did have.”

It may seem that I’m being harsh in this piece. Maybe I am. But it’s a simple fact that the only way to be financially sound is to live within whatever means you earn. If you only earn a small income, then you have to adjust your life accordingly, at least until your income goes up. It will likely mean that your life is not what you hoped for or what many of your friends have. It probably isn’t going to be fun. However, your life will be even more miserable down the road when you can no longer work and you have no choice but to rely upon government assistance or you are so deeply in debt that you have no choice but to go bankrupt. You can make it work on whatever you earn and financial advice can help you. You just have to stop justifying and complaining and get out of your own way, start making the necessary sacrifices, and learn to live on less.

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  • Cookie says:

    I don’t think it is harsh at all. I think it may offer HOPE to someone who hasn’t considered some of the strategies you mentioned yet. I know folks who think they are at bare bones, but still have cable and internet, get dinner for the family at drive-thrus, buy without shopping around and would never consider going door-to-door with flyers for handy-man jobs or baby-sitting services or even renting out a room.
    Many years ago, when I moved to my new job in a new city just after my college graduation, my take home pay was under $800 a month (this was in the 1990’s). My relatives said I could not survive. It took planning and prayer, but I rented a room within walking distance from my work, gave up my car, used rabbit ears on my tv, outfitted my kitchen at garage sales, lived on sandwiches or homemade soup, took the city bus to the grocery store, bank – any appointments, etc. In evenings, I cleaned offices and babysat. If there was a frugal idea out there – I tried it!
    Eventually got raises, some bonuses and later, found a better paying job, but I still think of that time as one of the most rewarding and creative periods of my life because I met the challenge my relatives thought I couldn’t.
    I hate to hear anyone discouraged, but sometimes they have to get to that place before they are willing to try some of the ideas you pointed out in your article.
    Great article!

  • knsfinancial says:

    You were not being harsh at all. This is an excellent article. As you stated, once every possible cost is cut the only option is to increase income. But I rarely come across people who actually have cut every unnecessary cost from their life.

  • rob62521 says:

    I think this article is realistic. So many people feel entitled to the big fancy house, shiny new car, and the expensive clothes. Then they complain when the bills come in.

    I think that many people in our parents’ and grandparents generation realized that sometimes you do without. Life isn’t fair and you can’t always have it all.

    However, in the past couple of decades society has made it an embarrassment to admit you can’t afford something or that you live below your means. I’m ridiculed for taking a Thermos of coffee to work. I don’t need the fancy latte — I brew coffee at home in a cheapie coffee maker — I buy the coffee on sale and stock up — then I create my own creamer by using cheap non-dairy creamer and a chocolate mix for milk. It’s cheap and it tastes the way I like it. My husband laughs and calls it “Thermos envy” when my coworkers make fun of me, but are living fairly comfortably and enjoy what we have.

  • Ms Independent says:

    GREAT article! got me thinking it was time to re-evaluate my spending and household expenses!

  • Bobbi says:

    Yes, this IS a wonderful refresher course. I am actually getting ready to go part time at my job, (voluntarily for several reasons), and will need to implement many of these suggestions. The time spent with my mom will definitely out weigh the income missed. Thanks!

  • Gail says:

    I think you are right on. I think it is ridiculous to hear people complaining of not being able to make ends meet when they are standing there puffing on a cigarette or drinking name brand take out coffee. I’ve known families that always complained of not having enough but on Easter their kids would have on new Sunday outfits while my kids were wearing their usual stuff as we literally didn’t have the money to by new. For some reason in the last 30 years our society has gotten so addicted to TV (while the shows have gotten worse) and can’t imagine giving it up because of course now you can’t watch TV unless you are on cable with extra channels that you just have to have.

    To make ends meet you have to literally decide that you will or won’t spend money on something depending on whether or not you have the cash on hand. It is doable but it involves discipline and most people don’t want to live a disciplined life. They want to live however they want and seem to think that magically the money will appear.

  • CindyM says:

    Good article and no, you’re not too harsh. You aren’t harsh enough, ha-ha. We now have several generations of people in this country who can’t seem to do anything but run around in their unpaid-for cars twittering and facebooking and chasing Lord knows what, trying to “get ahead.” I say stay home in your spare time, get off the phone, turn off that stupid TV and have a real plan you can work with. Ignore your peer group and all the rest, they’re too focused on themselves to care much about you anyway, ha-ha, so be not afraid of what they think. You don’t have to be like that; you can whittle down debt and never get into it again if you really want to. Most just don’t really want to.

  • Rebecca says:

    I give this article a standing ovation! 100% in agreement.

  • KimC says:

    Yes, excellent article – but where are the angry comments from readers who insist that they can’t and shouldn’t have to drive “unsafe” vehicles or move their families into “unsafe” neighborhoods?
    Sometimes the difficult choices come down to these, or at least they force one to examine one’s perception of safety. Most people don’t like that.

  • CalifGal says:

    Great article. It is not harsh; it is the advice that has been too long forgotten in our culture. This month I am challenging myself to stay on a grocery budget that is about half what I normally spend. I am shopping for real bargains, and getting much more open minded about using the food that I already have. But as you say, sometimes this just isn’t enough, and lifestyles need to be seriously cut back. Thanks for the reality check.

  • teresa says:

    I enjoyed this article, our family doesn’t have a problem making choices that are in line with the choices we make, now only if other people would worry about their own lives and not ours!

  • Elizabeth says:

    I was in this person’s shoes. I finally came to my senses and did a short sale of a home I could no longer afford (ouch!). I also moved into a much cheaper apartment. And I got rid of my paid-for luxury car that required a lot of expensive maintenance. Instead, I got a “free” beater car from a family friend and only paid to have it repaired.

    It was a HUGE lifestyle shift. But I realized that my income wasn’t like to rise to pay off my debts, so I had to take drastic actions to cut my expenses.

    18 months later, I have $25K saved in a money market account–more money than I ever have ever saved before–even when I was making much more money. I am happy and proud of my newfound frugality.

    I sleep much better at night!

  • athenabyron75 says:

    This is a great article. I think that people need to be responsible for their own lives. I know that I’ve routinely spent above my means and now I am taking steps to correct that and to make sure that as I go forward I don’t spend more than I earn. Which is hard with a son and an electronics loving husband.

  • rosemary_sanders says:

    When will we realize that all the advertising on TV is designed to get us to live above our means and we can live on less!!!


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