LBYM: Live Below Your Means

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty-pound ought and six, result misery.”

-Charles Dickens

Living below your means or (LBYM) is not a sexy headline. It is safe to say it is pretty much the opposite of sexy. However, it is one of the most fundamental and most important concepts to grasp in personal finance. If you ran a business and consistently showed expenses that were greater then income month after month you would eventually run that business into the ground. No one that is rational would keep a business like this running because it would be costing them money every month. The same thought process should be applied to your personal finances, this is obviously easier said than done.

Why do NFL players with successful careers end up broke? Why do famous actors like Johnny Depp get into financial trouble? It is because they do not live below their means. LBYM is a lifelong skill, no matter how much money you have this needs to be applied. If you are just starting out and have a low-income IT WILL BE TIGHT but you can still LBYM it just requires sacrifice. Obviously, someone like Johnny Depp is spending multiples more than your average Joe but nonetheless the math works all the same. Spend more than you earn and you will get yourself into trouble.

So, what are some ways that you can become a lifelong learner of LBYM?

Keep living like a college student.

Don’t worry if you didn’t go to college you aren’t excluded from this group! The name of the game is to live like you are still broke even if you have started making a good income. Do this until it is painful and then S-L-O-W-L-Y adjust your lifestyle up when you are well on your feet. It is so easy to go out and buy a nice car or rent an expensive apartment and say things to yourself like “I deserve this”, but, you don’t! Times are not that tough in modern society you have everything you need in America on a basic income, the luxuries of life can come later. Instead do yourself a favor and establish a strong foundation by living like a college student and banking the difference. You can always scale your lifestyle up but once you creep upwards it’s hard to go back to that Honda civic.

Establish a budget based on your current income.

This one is so key but today it seems like less and less people care. It is finance 101 to sit down with a big cup of coffee look at your bank statement and all your bills and see how much you are spending. Without knowing this you are truly in the dark. There are many resources out there like YNAB that you can use to help you get started. Personally, I try to focus on the biggest expenses of life where you can get the most bang for your buck, think housing and cars and then I move down to the smaller categories. What works for me may not work for you but whatever you do it is important that you care educate yourself about budgeting. Otherwise you will feel like a dog chasing your own tail.

Realize that it will get easier.

This is something that I think is hard to see when you are getting started. It can be so discouraging when you are getting on your feet. It feels like you are busting your butt and barely moving the needle but the amazing thing is that once you start to focus on it you will see changes, guaranteed. The same way money compounds from investments your good decisions will compound with your personal finance choices. You will become more educated about finance and will see ways to save money that you never paid attention to before. Don’t overlook this and try to stay positive and it will get easier.

Stop comparing yourself to others.

If you are on Facebook, Twitter, Instagram, Snapchat, LinkedIn, YouTube, Pinterest or any other social media site you are going to see the best of everyone’s world. Everything is rosy with a filter and a sunset, so tune out the noise and give yourself a break. If you know you are doing the best you can that is what you need to focus on not what other people are doing. Just because your Grandma mentions Joanne’s son or daughter is doing amazing doesn’t mean that you are not achieving anything! Stay focused on the road in front of you and keep making progress don’t get distracted by others.

Splurge on the things that matter the most to you.

When grinding through you will have tough times to face. One day you will wake up and have a healthy income and low expenses if you take advice from this site and other like-minded thinkers but until then it is a battle. You can’t constantly be in the trenches and sometimes you need a break, we are all human after all. If money is tight you will have to decide on what is most important to you. Is a vacation number one? Maybe it is healthier food and a gym membership to keep your sanity during long work weeks. Whatever it is make sure you make time for it, it is important. If you don’t ever give yourself small wins you will become angry with your plan and most likely it will fail. Enjoy what you care about with a splurge here and there and then get back on track with your plan.

LBYM is not easy but anyone can do it and like many things in life it gets easier with time and practice. I can guarantee that if you choose to not LBYM you will not have excess cash to invest and therefore will always be feeling tired and left behind. So do yourself a favor and do whatever it takes to LBYM today and forever into the future, it will be well worth it!

What Are Your Thoughts?
  1. Do you think that our society lives below our means?
  2. How do you manage to have additional money left over at the end of the month?
  3. If you had a million dollar income and it was publicly known do you think it would be easier or harder to LBYM?

 

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