Living Within Your Means: A Key to Financial Success

by AJ Pettersen · 20 comments

Many people live their lives striving for a big house with nice cars and all the toys and gadgets they could imagine. Some work really hard to see these things come to fruition, while many never reach this level.

My fiancé and I are currently searching for an apartment to live in after our wedding. The plan is for a six month lease, but we have to choose between a nice place that is more expensive or one that is sufficient and cheap. This is a decision we need to make based on our current financial situation. The same decision needs to be made for our cars and other bigger ticket items, which could make a big difference in our finances down the road.

But First: Housing


My fiancé and I have the decision between keeping her apartment for another six months at $610 a month and moving into a newer place to spend our first half-year as newlyweds. Do we want to live in a nicer complex or town home? Definitely. Can we afford to? This is something we have yet to answer. This is the first housing decision we will make in our adult lives. While it doesn’t have a huge impact on us, it will be a good indicator for how we will make larger decisions (like buying a house) in the future.

Where you live is a decision that shouldn’t be taken lightly. What are the implications of buying over renting? The housing market crash left many people in foreclosure. If you can foresee having trouble paying for a home in the future, you ought to avoid the payments now. Being responsible in a big decision will help you achieve financial freedom.

Our Cars

Do you buy new or used? I grew up in a family where new cars were out of the question. My family spent money on things that we valued higher than our mode of transportation. I can’t see myself spending a lot on a car because of my past experiences. Getting cool features and an impressive appearance is great, but does it fit in your financial plans? I spent less than $3000 on my last car and it has been very reliable. What more do you need?

This is similar to buying a house on a smaller scale. How do you value cars? How have you made this decision in the past?

Other Expenses

Wherever you place your values is where you will typically spend money. This could be children, athletics, entertainment, etc. Financial decisions need to be made with an end point in mind. If you need to extend your wallet to make a purchase, the purchase probably isn’t worth the debt. My family spent a lot of time and money on my growth in athletics. This is something we felt brought us joy and thus we placed a high value on it. Other families may value entertainment systems and/or raising a large family. What is important to you?

What Have I Learned?

In the past year, I have been in complete control of my finances. The journey has taught me many things I never thought it would. Being in a job that could last 20 years or 20 days, I have thought extensively about what I will do post-baseball. How much money do I want? How much do I need?

The most important thing I have learned is that as long as I am with the ones I love, I will be completely content. There are some things I want to accomplish in life and money is an inevitable part of these, but I will continue to live and make purchases in a way that will keep me as financially free as possible.

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{ 20 comments… read them below or add one }

Steve from TravelingProfessor.Com May 30, 2012 at 7:00 am

I had a period of time in my life where I was living the high life – big house, new cars (only Mercedes, BMW, and Land Rover), expensive European vacations, etc.

The financial pressure made it the worst time in my life.

I now live within my means, splurging only on very special occasions. I have never been more content and happy.

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albe June 22, 2012 at 5:25 pm

How easily we set ourselves a script to follow. When I was young I demanded a new mustang twice, but now things are different. I avoided a house “til i was 38, but that became quickly a loss when I had to sell, no gain. The car culture plays on men, women I suppose too.

Now I bought a van, which I need for work. I spent about $1800 dollars on it. The car still works. Others have spent huge sums monthly because of what? The social stigma we think it expresses to self and to others. Well I’m an old geezer now, so it doesn’t matter to me. I get to work and the grocery store, and I still have a new muffler that looks new 2 years later. I used to commute 60 miles each way, but I moved and live 3 miles from work to get almost the same paycheck.
Luckily the insurance is less too.

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Kathryn C May 30, 2012 at 7:12 am

What a lot of people don’t realize is that it’s really hard to live within your means if you always want more more more. And we want more more more if our peers have more. We compare ourselves to our circle if friends (usually our closest 150 friends). It’s natural.

I’d say that part of understanding how to live within your means comes from being disciplined regardless of what is going on around you, but the other part comes from who you hang out with and the circles you run in. If you run in circles where people don’t live below their means you’ll be hard pressed to do the same since we all have status envy to a certain extent.

I see this everywhere in LA.

So the easiest way to live within your means (and a way that people rarely think about)…. fire your friends who don’t live within their means. They’re killing your savings mojo and you don’t even realize it.

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S. Ahmed Mubejo May 31, 2012 at 3:20 pm

Hi Kathryn,
I totally agree with you. I had experienced this in my undergraduate school. Whenever I went out with my friends we end up spending a lot of money. It was not like a competition, but we were just going with the flow. We end up spending a month budget in 10 to 15 days. I went through a hard time to control my expenses later on. I think whenever we hang out with friends we need to know our limit and be in that limit. This is hard but achievable.

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The Cruise Lady May 30, 2012 at 3:04 pm

I would stick with her apartment for 6 months. See how it fits the two of you. Give youselves time to think it out. Save your money toward a downpayment, or an upgraded rental.

As to cars, it depends on how much you will be driving, and how long you plan to keep them. DH and I each bought one new car before we started dating, kept them after marriage. The town we lived didn’t have good public transportation.

After that, mostly used, two new cars. The 1979 Honda Accord was traded for a used car that suited us better. I like my cars to be newer when I buy them. Neither one of us are mechanically inclined, and a newer used car still is under warranty.

I got one car with only 740 miles on it, kept it 11 years, 114,000 miles. The radiator sprang a leak on the freeway, by the time we pulled over, the engine was fried. We replaced it with a new van that we used in our business. It’s still going. Not “strong,” but good. Should do us another 3 years.

I wound up taking a temp job 750 miles from home, needed a new car. Hard to go on one car when you’re that far apart. I got a nice sedan, 18 months old, only 7500 miles on it. That was 8 years and 90,000 miles ago, it’s probably the best car I ever had. Hope to keep it 5-8 more years.

Good luck with your decision making.

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Lance@MoneyLife&More May 30, 2012 at 4:58 pm

Very important to live withing your means. I could have bought a house 3x what my townhouse is worth but I like the townhouse and it was a great deal. Not my perfect idea of a home but I really do enjoy it and its location. I also don’t find myself trying to keep up with the Joneses because I am the Joneses in my neighborhood :)

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Paula May 31, 2012 at 8:31 am

Hi Lance we are considering buying a resale townhouse but we have a daughter and we want her to be able to run around in a yard. The townhouse would be withing our means and cheaper payments. With a new home we would be overextending ourselves. Ah yes, I think compromise might the the only option for us

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Paula June 29, 2012 at 9:12 pm

*within our means* :)

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Justin @ The Family Finances May 30, 2012 at 7:20 pm

The key to living within (preferably below) your means is contentment. There’s no way to do this if you’re always looking for more/better things. You have to focus on what’s truly important to you. Realize that it’s perfectly fine to spend money on things that really matter, as long as you cut back on the things that don’t. And if we’re completely honest, the best things in life don’t really cost a lot of money: healthy relationships with people we love and care about.

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Marbella May 31, 2012 at 2:35 am

It is better to have a small apartment – house and a smaller car, with small expenditure do you feel better and are not very sensitive, nervous, etc. with all the economic crises we have today in the world.

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Tammy June 1, 2012 at 4:09 am

I have been living in rentals for several years following a divorce. It was a struggle to get my spending down to the important things and focus on saving. I have a small house under contract now but it was tough to say no to some of the larger homes that were in my price range. I found myself imagining how nice they would be for entertaining guests etc. It took a huge effort to remember that 90% of the time I will be there alone… Heating and cooling empty space.

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GodricAvery June 2, 2012 at 4:46 am

The key to financial success is adopting a cash flow plan that will guide your financial decisions on a day to day basis. In addition, you will feel relief from financial stress and gain a greater sense of control over the financial lives.

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Shane June 5, 2012 at 11:58 am

Many people these days live beyond their needs and some beyond their means. There are many things you can do to reduce this, and it isn’t as hard as one would think. I think now more than ever people should be working hard to not be in any type of debt.

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Gavin June 5, 2012 at 2:46 pm

This is so true, some friends of ours recently moved into a $1.5m house and less than a year later are looking to sell because they can’t afford the upkeep. Oops.

Sometimes the smaller house with no mortgage is a better bet.

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Jean June 7, 2012 at 2:31 am

Our first car was a used one and it wasn’t a good experience so we decided that even if funds were tight, we’d buy a lower end but new car. You just never know what the old car’s been through and what problems might pop up, no matter how well you scope it over.

-Jean

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Julius Mokaya June 12, 2012 at 12:20 pm

I agree with Kathryin, FIRE YOUR FRIENDS!!! Am in my final year in undergraduate and I have constantly been seeing it. You will spend as much as your friends will be spending. The best way out for me was to simply adopt the lone-wolf strategy unless I couldn’t avoid company. I ended up saving 20% on my weekly expenses.
Twitter – @jmokaya

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Rhona Kyomuhendo June 13, 2012 at 1:23 am

Kathryn, is right. With friends, you will spend a lot. I decided to enjoy my company and learn to be comfortable with it. I realized that i can save a lot more this way. I spoil myself once in a while and hook up with the few very good friends i have. With this new job, i know i will be able to save a lot of money .

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RD June 19, 2012 at 12:03 pm

Acquire a skill that is valuable and marketable. Earning will not be the problem. I keep a wind chime that rings every time my door opens. The cheerful peal reminds me that the best things in life are free.

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Abdul Hameed June 29, 2012 at 8:37 pm

I have the same problems with my finances, always spending more then what i earn, i have never thought about taking control of my finance, but after reading this article my understanding of how i should be spending money has changed. I will do best to maintain this,

Nice article and worth reading comments, learn very good tips from all of you,

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Valerie July 5, 2012 at 10:07 am

Friends don’t make you spend your money, your value of your self-worth does. And when you value yourself you don’t need to keep up with your friends.

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