Living below your means

What is living below your means?

The idea behind this is to spend less than what you’re bringing in monthly.

With this, I’m not focusing on your day to day spending but more so your biggest purchases – house, car,etc. Those things that would require you to take loans out.

As an example, when I bought my condo, the lending institution was willing to give me a mortgage that was between $600,000 and $700,000. This was easily double what I was wanted to spend, especially when I figured out what my mortgage payment would be on a monthly basis!

I’m sure the place could have been real nice though!

My worry was if I were to go higher than what I was comfortable with, it would tie to me to both my job and a certain salary bracket that may not be achievable if I ever needed to make a career change. My stubborn streak came in handy this time!

These lending institutions have a different way of measuring what kind of debt individuals can take on. If you’re in the market for a house or vehicle, figure out what payments you’re comfortable with before going to a lender.

Always leave some room and don’t max out your budget because costs will pop up every month so you’ll need to be prepared to handle those. There’s also the things we don’t like talking about - there could be layoffs, medical emergencies, something that prevents you from doing your job and making the same salary you were before.

So if you have the ability to live below your means, maybe get the most cost effective vehicle or house then the fancier models, it could help you out in the long run.

Plus, they will always be there in the future!