How to Live Below Your Means

I wouldn't call it a radical new idea, although a popular women's magazine declared recently that living below your means (LBYM) is the hot new trend.

It is a simple concept: spend less than you earn. Still, LBYM is seen by many as a life sentence, not the lifesaver that it is. It can take a crisis like unemployment or a sudden illness to reveal to some people just how far in over their heads they really are. That's when a lifesaver looks really good.

Your household is like a business. You have revenue and expenses. If you spend more than you bring in you will take on debt. A business that continually takes on debt will eventually fail. It is a healthy company that ends the year not just breaking even, but with money in the bank. Same at home. That's LBYM.

A commitment to LBYM should not be taken lightly. It's a big deal, particularly if you have come to see credit as an extension of your income.

If you've ever flown on a commercial jetliner, you have survived a "controlled crash," also known as landing. I'm no pilot, but I've read how much control is required to take a piece of machinery that weighs many tons going at a speed of 600 miles per hour and bring it to a full and complete stop precisely at the gate cited on that monitor inside the terminal. It's called "reverse thrust," and, depending on the length of the runway, that braking sensation can be an interesting experience. You're belted in for good reason. Thankfully, those systems work thousands of times every day.

If you struggle with living beyond your means, it's likely you've been spending at a rate of about 600 miles per hour, metaphorically speaking. Things are out of control. You need to bring your spending problem to a halt by making a serious commitment to stop living beyond your means.

For the next 30 days, track your spending. Write down everything, from that cup of coffee to your rent or mortgage payment and everything between. At first, it will feel like you've just reversed your engines, that you're about to be thrown on your head. Once you get your bearings, you'll be ready to start the important work of plugging up all the places that money is leaking out of your life.

One of the best ways to plug those money leaks is to start talking to yourself. Whenever you are faced with a desire to spend, stop long enough to ask yourself:

1. Can I afford it?
2. Do I really need it?
3. Do I need it now?
4. Do I have something like it already?
5. Can I find a cheaper substitute?
6. Is this the best deal?

If you make it through all six questions, go home and sleep on it. Tomorrow you'll probably change your mind. If not, you'll have the confidence you need to make the best decision.

Copyright © 2010 Mary Hunt. Everyday Cheapskate is a Registered Trademark. All rights reserved. Permission to reprint required.

Check out Mary's recently released revised and expanded edition of The Financially Confident Woman (DPL Press, 2008).

Debt-Proof Living was founded in 1992 by Mary Hunt. What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt. Today, "Debt-Proof Living" is read by close to 100,000 cheapskates.  Click here to subscribe. Also, you can receive Mary's free daily e-mail "Everyday Cheapskate" by signing up at EverydayCheapskate.com.

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