Living Within Your Means: A Key to Financial Success

by AJ Pettersen · 24 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 townhome? 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 indication of 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? It seems like a distant past but the housing market crash left many people in foreclosure. And with interest rates zooming up like crazy, a housing crash could just be around the corner. If you can foresee having trouble paying for a home in the future, you ought to avoid the payments now. Being responsible for 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 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 into your financial plans? I spent less than $3,000 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 endpoint 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?

I have been in complete control of my finances in the past year. The journey taught me many things I never thought it would. I’m a professional baseball player, so my job could last another 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 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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{ read the comments below or add one }

  • Arminius Aurelius says:

    Thrift pays off Big Time . While in the Navy , had about 20 % of my pay automatically put into government bonds . After I got out of the Navy [ 4 years ] I wanted to go to Europe since our ship never went there . I did not want to touch my savings , so I worked a regular 40 hour a week job and then another part time job , 4 hours a day / 5 days a week . I took a 3 month vacation bicycling thru Europe and staying in youth hostels . Another way I saved money was I always bought low mileage used cars , under 18,000 miles . My last Lincoln Town car that I bought with 13,800 miles on it , I saved $ 23,000.00 . One other way I make money is to sell shares of stock I own when the market is irrational . January of this year , the Dow Jones hit over 36,000 . I sold most of my stocks and wait for a market crash [ now down to about 29,000 ] It is guess work but I believe that it may drop down to 23,000 or less. When everyone else is selling , I then BUY , BUY , BUY . ……… cheap

  • Valerie says:

    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.

  • Shane says:

    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.

  • Julius Mokaya says:

    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

  • Latoya says:

    This is so true. Some of us value one particular thing over the other and for sure that’s going to be where a lot of our finances are directed. I think it’s important for anyone to make sure that the things they value are not something they “think” they should value or something that someone else’s value. If it’s something you truly want to carry the expense for then make it work for you. Just don’t try to live to anyone else’s expectations except your own.

  • Jean says:

    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.


  • Rhona Kyomuhendo says:

    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 .

  • Carolyn says:

    I’m paraphrasing someone else but they said financial success is having everything you need and SOME of what you want. For example eating is a necessity but eating steak is not…lol
    As others have said decide what your priority is and focus on that – if you want a larger home then something else will be need to less e.g. travelling or cars or gifts.

  • Justin says:

    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.

  • Lance says:

    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 🙂

    • Paula says:

      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 within 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

  • The Cruise Lady says:

    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.

  • Gavin says:

    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.

  • Derek says:

    My wife and I always went with cheaper cars and a less expensive house. Living within your means will mean for us that we will be financially independent nearly 25 years earlier than most folks! It’s the only way to go 🙂

  • Kathryn C says:

    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.

    • JJ says:

      Kathryn, if we were racking up points here, you’d have just earned 21! “More more more” is the size of it. Even Howard Hughes wasn’t immune; when asked how much was enough, he replied, “A little bit more. Just a little bit more.” And he the wealthiest man imaginable! Sad.

    • S. Ahmed Mubejo says:

      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.

    • Caroline says:

      I do get the point, that if one is frequently hanging around with very wealthy people, one is likely to start envying / unconsciously trying to keep up with them, just because it’s human nature, but the idea of ditching a good friend who happens to be wealthy is just as bad as refusing to be friends with someone because they are financially strapped. I get that you’d be specific about what kinds of occasions you’d spend with them, and tend to spend them in more neutral locations, such as on the beach, hiking, at home for a potluck / pursuing a sport or hobby together, but if we manage to drop that chip so many of us carry, and just be perfectly honest and don’t place our worth on the contents of our bank account, it’s perfectly feasible to have friends at all stations in life.

    • Ramona says:

      We have VERY rich friends and also friends who are not doing that well financially. We don’t compare ourselves to others and try to focus on what makes us happy and not what others think we should do/own. We’re not 20 anymore, maybe this also helps 😀

      In this case it’s not that difficult to stop splurging on stuff that doesn’t make sense. Of course we do have our own financial mistakes, but we’ve improved dramatically in the past years, especially after becoming parents.

  • Steve says:

    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.

    • albe says:

      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.

  • Tammy says:

    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.

    • Caroline says:

      That’s just it; remember and be realistic about how your life actually IS rather than a vision of how it might be. Clearly I don’t know the size of the house you’re buying (congratulations by the way!), but I cannot imagine it would be impossible to ever entertain there at all. One day maybe your circumstances will be different and you can get somewhere a bit bigger (or not! Maybe you’ll rent it out and travel the world…), but meanwhile you are a home owner living within her means, with moderate bills and I presume a pleasant, comfortable home. Winning!

  • Marbella says:

    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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