Living Within Your Means

When we purchased our first house we put down a large down payment. Our realtor was surprised to find out we didn’t have any other debt. Getting the loan was no problem as we bought quite a bit less house than what the banks said we could afford. This all seemed normal for us–we try to live within our means if not a little below it.

Several years later the realtor stopped by to say hi. He said, “You and your wife were really an inspiration to me. We’ve started paying off our debt and trying to get our living expenses under control.” Evidently his normal customers weren’t people who lived beneath their means.

When you spend less than you make, you are buying flexibility and freedom. You gain the ability to change jobs or move to another area of the country. You are buying the ability to say yes to the things that matter because you save on the areas that aren’t as important to you.

This isn’t something most people do. If all your friends spend every penny they make it is easy to feel like you are doing well by just not going broke. There are people who are quite wealthy even if you’d never know it. They have chosen financial freedom over financial exhibitionism.

Unfortunately it is easy to notice the people living beyond their means and harder to spot the people who are living within it.  This means we tend to see reckless spending as normal simply because it is so noticeable.

Do you have any examples you’d care to share of people living beyond their limit financially?

Good management of your finances can have one of the biggest impacts on your productivity because it determines how efficient you convert your time into money into the things you need.


  1. Phil says

    “They have chosen financial freedom over financial voyeurism.” Don’t you mean financial exhibitionism? I’ve noticed a lot of “broke” people heading to Tim Hortons or Starbucks every morning, then following the crowd to the restaurant of the day for lunch. These small, daily purchases might not be financially exhibitional, but they do add up to quite a lot of money at the end of the month. Often these are the purchases that could be cut from our lives that tighten our budgets without us really realizing it.

  2. Mark Shead says

    @Phil – Good point. I made the change you suggested. I’m not sure exactly what I was thinking when I wrote it. :)

    People who are broke are often that way because they don’t see “small” expenses as being meaningful.

  3. adora says

    I know many people who use brand name handbags (Gucci, Prada..) but living in government housing. Which means that their bags can easily cost several months of their rent. They claim that they NEED them to make them feel confident. The truth is, other people think they are knock-offs.
    Shouldn’t worry about how other people think. Most of the time we only care about our own self. It’s called “Spot Light Effect” in psychology.

    • says

      But what if they are knockoffs? I live in a low-income area and they sell knock off handbags and sunglasses at the corner store for $25. Things aren’t always what they appear to be!

  4. Mark Shead says

    @adora – It is interesting how often I see brand new cars parked in the low income housing areas. I think if you have to have the government pay for you to survive you should be put on a very strict spending diet. You shouldn’t be able to buy cable television if you can’t pay your rent.

    • says

      I disagree with this. I moved into housing projects when I was 6 years old. My Grandparents still live in housing projects. Yes, there are plenty of new cars in the parking lot. But 3 of them are owned by retirees who have excellent credit, a modest income, don’t have the ability to maintain a home (my Grandparents were home owners, but opted to go into housing projects because the upkeep and maintenance of their home was not doable for them anymore) yet can live on their own. There are also people who collect SSI who are in similar situations. Other people have newish cars, but got them via those rent-to-own places where the monthly payments are 250% more than the market rate and will most likely be repossessed within a year or two. The balance of people who have cars drive older ones or are getting money under the table or illegally in order to purchase these cars. Of the later…I would say that only represents about 1 out of 10 of the cars you see parked in the projects.

      Back in the 1980s, it was not so common for people in the projects that I grew up in to have cars. However they have cut back public transportation to next to nothing, so if you have any type of job (even if it’s working at McDonalds), you need a car in order to get there (Note: I didn’t grow up in a major metropolis; rather a suburb of Pittsburgh).

      In all honesty, how often do you (not you Mark in particular…but anyone who criticizes low-income people) spend time in ghettos, housing projects, and low-income areas?

      • says

        What exactly are you disagreeing with? My point was that if the government is taking money from Ted to provide Bill with subsidized housing, there is a problem if Bill somehow has the money to buy a new vehicle while Ted can’t afford one. There is a problem if Bill has money to buy cable television and Ted decides it is a expense he can do without.

        I’ve spent a fair amount of time around subsidized housing projects and have known quite a few people who live in them. I have yet to meet anyone who lives in government housing for an extended period of time who is hard working and financially responsible. I’m not saying that they don’t exist, but experience suggests that they are rare.

        • says

          Vehicles are not nearly as expensive as the cost of housing (for the majority of the population; of course this does not include people who own their homes outright or had their home given to them). In regards to cable, I can’t really comment on that since I haven’t personally gone inside many people’s homes in the projects to see if they have or not. However my Grandparents (project dwellers) have the biggest cable package there is. They also almost never go out for entertainment, and they see it as a way to entertain their grandchildren when they come over. However personal anecdotes are just that…personal. I will admit that about my own opinions. However I am coming from a position of being raised and in almost daily contact with low-income, project dwellers who are on welfare (my BF is on welfare, but since he would never be approved to live in the housing projects as a single man, he lives with me).

          I would say that about 1/2 of the people that live in the projects where my Grandparents live work; a good number of them full-time. The problem is they work hourly, minimum wage jobs and most likely make around $15K (that’s assuming 2080 working hours a year…which they probably don’t get) before taxes. They have 2 or 3 children so they easily qualify for subsidized housing. But you’re focusing on cars and cable. Let’s say you buy a $10,000 (which is pretty common….my own 12-year old car was more than that) and finance it over 3 years. That’s only $4K (just estimating finance charges) per year. Cable can be had for $60/month. Housing on the other hand is a different story. A modest 1-bedroom in my area goes for $450/month minimum. When I lived in Southeast FL, you could tack on another $300 to that amount. So to me, it is quite clear how someone could afford (although it may not be the smartest use of their money, but they can pay it) cars and cable…but not a home. For those who have homes, why can you not afford cable and cars? Basic, crappy cable (which I have) is only $40/month (and I have the internet package). I agree that the price of cars is through the roof, but home owners can take out a home equity loan (if they have the equity to use as collateral at least).

          Bottom line is that I strongly disagree with the idea of the middle-class (and higher) berating poor people in housing projects. I would love to see some of these people deal with the reality that faces these people. My own mother could tell you some tales. She’s worked full-time since she was 18 years old…but she has never made more than $9.50/hour (her current pay). She pays $400/month in health insurance alone. If anything at all comes up with my sisters (my one sister is graduating this year…which presents a nice amount of extra expenses), she HAS to work overtime. She lived in the projects for 7 years until she met her current boyfriend…who she moved in with 2 years ago. So she’s getting a big break right there. But for ages, she had to make it off of $50 a week after taxes, rent and car expenses. So it’s not about hard work and financial responsibility. I myself am not financially responsible (which I freely admit) and I would be going crazy dealing with $50/week. However my mother makes it work…somehow some way. And she works VERY hard. So to me it’s clearly an issue of being able to secure some sort of minimum income level before you can suggest that someone “live within their means”; especially when that income can’t provide for the basics — food, clothing and shelter. Thankfully our government provides for those who don’t have enough earnings on their own to get these things (which I’m quite proud of).

        • says

          Alice lives in housing that costs $700 per month to provide, but the government only charges her $500 per month. The extra $200 per month comes from Bertha and gets taken out of her taxes and used to pay for the extra part of Alice’s housing. Alice spends $100 per month on cable. If Alice has the money to spend $100 per month on cable, doesn’t it make more sense to charge her $600 per month for housing and only take $100 from Bertha?

          I’m not talking about someone whose money all goes to cover their basic necessities. I’m talking about people who are taking money from people who earned it (through the government) and have extra left over to buy things like cable.

  5. Jen says

    I have friends who about a year ago, refinanced their five year old mortgage from 24yrs back out to 25yrs so they could release some cash for home improvements. A year down the track, and they’ve bought a large boat with the money and made one $800 improvement to the house, and taken a few holidays. One of the ‘keep up with the Joneses’ types. Lovely people, but not wise with the expenditure.

    I also have another friend whose husband keeps a tight rein on the budget, but then insists on buying brand new cars every three or four years. I guess everyone’s different with what they want to spend their money on. To me it seems like pinching the pennies and letting the big bucks just roll out of your hands, especially with new cars – the minute it’s driven off the showroom floor, the car loses several thousand dollars in value, even if it was immediately resold. Mind you, I’m not the best at hanging onto my money either!

    Thanks for the timely reminder Mark. :-)

  6. Ricky Richards says

    I fall into the small expenses category. My wife and I have cut out all TV except for antenna, have turned off our text messaging and web from our phones, and have cut our home phone to just allow for internet (no broadband available). We have two vehicles both bought for cash for 2000 and 1000 respectively.

    You would think we would be doing good. Like phil and mark said I usually have lunch out most days a week considering a work 40 miles from home. At gas stations and grocery stores I will usually pick up a bottle drink or a iced coffee or something to snack on. I recorded my small everyday purchases over a weeks time and it was well over $150 which shocked me. People just don’t realize how 5 bucks here 15 there adds up over a week or months time.

    We do have some friends who are in our same financial bracket and they have went through 4 or 5 vehicles in the same amount of time we have had our 2. The difference is that theirs have been repossessed 3 or 4 times and they have at least 500/mo car payments where we have no payment.

    • Ginger says

      Yep, little purchases add up. The “it’s just $5” thinking can waste a lot of money. Years ago some guys at my brother’s work asked him why he brought his lunch to work instead of going out. He told them that he’d rather have a house. He and his wife were saving up for their 20% down payment.

  7. says

    Go to to read our story about financial freedom. By age 33 we own a house free and clear, pay our credit cards off each month, have no long-term debt and have loans receivable (earning us interest) of over Cdn$90,000. Our passive income exceeds our basic expenses by over 50% each month. We are not doing anything illegal. :)

  8. says

    This is a fantastic article. All throughout my teenage life I had considered this financial freedom something to strive for. At the very basic I was constructing monthly expense reports in order to evaluate what was coming in, what was going out, and how much was saved. The goal, of course, was to optimize my savings in such a way that I was saving money from every pay check to the maximum amount, but also spend in such a way that I had a lifestyle that I was comfortable with but was not over and above the top. Usually if you spend a lot of money daily on food, you run into a diet that is probably more then likely higher on the fatty chain.

    Thank you for this prose, I think I am going to write about it @t my blog @ I will be linking to both of your sites so that people can get a better idea of what I am talking about.

    Great article.
    @J. B. Rainsberger, I will be taking a look at your blog later today so that I can acquire the magic that you possess.


  9. Tim says

    As someone who grew in a household that took great care to always “live within our means” it has always seemed self evident. It wasn’t until my friend started working as a banker and started telling me stories of his (anonymous of course) clients and how the vast majority had appalling finances before I realized just what a problem it is. It makes me particularly sad to watch the horrific result of financial recklessness plaguing nations around the world. It’s not rocket science, spend much less than you make.

  10. says

    This is something that hindsight clearly shows you, but not a lot of people have the foresight to see what living beyond your means can do. I know I didn’t! I think I always felt like our income would grow, and we would easily be able to pay off any debt we incurred. Didn’t happen. I’m not saying we are stuck, but the freedom that comes from living within your means is much more satisfying in life than experience some luxury for a few moments while spending outside of your means.

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