Living Within Our Means

 

Is it a thing of the past?

In the past, we used to save for the things we wanted and bought them when we could afford them. It seems that, in the last 30 or so years there has been a dramatic increase in the Buy Now, Pay Later loan industry, thus the use of credit cards, personal loans and home equity loans that allow us to borrow money for purchases we couldn’t afford otherwise.

This variety of loan options has made it much easier for us to live beyond our means and buy things before we can pay for them. Saving money over time and paying in full for something we want has become almost foreign.

The experience of accomplishing a savings goal is a thing of the past. Now we have the stress of overextending ourselves and pledging our future income before we’ve earned it.

Of course, there are valid cases where it makes financial sense to borrow money to make a purchase. Buyers often borrow money to invest in an asset that appreciates — like a home or a business. However, borrowing money to pay for a depreciating asset like a car, furniture, or vacation, can pull you into a never ending debt cycle.

There is something ironic in the works here — buying things is often used as a reward “deserved” for hard work: “Why don’t you buy yourself something nice?”. This implies that work is drudgery, so in order to ease the pain, the money earned is spent on some gadget, therefore requiring more work.

I think it’s our level of discipline and ability to delay gratification that makes the difference between saving to buy something and taking on debt to buy something. After all, a payment on a debt is really just a form of forced savings, except with an additional interest expense.

Regardless of your level of income, when you make it a habit of living beyond your means, you are creating a future liability that will come due and could have an adverse impact.

On the other hand, living within your means has many benefits. It contributes to being happy in the present moment. It allows you to buy things without having to borrow money and may give you the ability to survive an unexpected emergency or setback.

Ironically, people are often most innovative when they have to work with financial constraints, as opposed to having the freedom to buy a solution to every problem. On the other hand, those who live above their means leave themselves open to catastrophe when misfortune strikes.

I believe we can still accomplish great things without lavish spending or living beyond our means.

What might it look like for your to live within your means?