Living Below Your Means: Break free from Consumerism
Corey Sarti went from making $75,000/year as a logistics manager at a software maker, to being laid off in October 2006, with three children, a mortgage, and two car loans.
“I started looking for a job immediately,” said Corey. “I’ve gone on 5 or 6 interviews. And gone through second interviews but the offers have been in the $45,000 to $50,000 range with no bonus. It’s too far of a step backwards.”
$45,000 to $50,000 isn’t enough money to live off of? Are you kidding me? I’m a single white 20-some year old female supporting her disabled father on $30,000/year. My sweetheart was raised taking care of his 5 siblings while his mother worked two jobs making $17,000 a year. The term is called “Living below your means“. Why people insist on surrounding themselves in frivolities is beyond me. This is what you risk when you buy the huge expensive house and the huge expensive cars with a huge expensive mortgage. American’s have yet to learn the art of living over the art of gluttony.
“The holidays were a trying time,” with few toys for their three kids, he recalled. A year earlier at Christmas, there were XBoxes and iPods under the tree. “It’s been a lifestyle change” is how he characterized unemployment. “An immediate drastic lifestyle change.”
Oh now I can understand completely. We wouldn’t want to be able to do without the Xboxes and iPods for our children. (This is where the consumerism rage of the holiday madness comes from). We’ve trained ourselves to be dependant on useless gadgets and unnecessary luxuries that we willingly put ourselves into financial ruin should something go wrong. What happened to frugal living? What happened to the feng shui art of freeing yourself from material possessions?
So what are some good tips to at least start changing our gluttonous ways and freeing ourselves of the biggest and best? These are a few that I’ve put into practice that have helped me break free from debt and actually start saving money and building up that emergency fund.
Don’t use credit cards - I don’t say this in the sense of don’t ever have a credit card. I’d actually always keep one around for emergencies, but never use one for generic or regular purposes. If you don’t have the money to pick up that new DVD, then go home and watch an old DVD with a loved one and reshare the memories.
If you have a credit card already and are trying to pay the debt balance, pay the highest interest rate first. Call your credit card company once a year or so and ask for a reduction to your APR rate. If you can’t get one, transfer to one with a lower APR.
Keep track of your income vs spending - To get a really clear picture of how much you’re spending each month, and where you can logically cut down, you need a list of amounts and categories. I use Microsoft Money to keep track of every cent that goes in and out of every account I have. It automatically generates reports and pie charts for me to use as comparison. This way you’ll at least have an idea of where problems might be, and what you feel you can do without and still remain happy.
Stop the addictions - This is fairly obvious, but addiction to alcohol or cigarettes is murderous on your wallet and health. I’m always baffled when I see “poor” people chugging down a bottle of beer while munching on a crisp cigarette. I personally have never smoked, I never saw the desire nor ever had the money to do so. If I -had- started smoking two packs a week since 18 years old, I would have spent $2,808 in that amount of time on cigarettes. If I had smoked a pack a day, I would be out $9,828, and that’s generous at $3/pack.
Eat at home - This has been stressed in several financial advice blogs lately. Eating at home, and less going out. This is one that I practice regularly, mostly due to the fact that the money is better spent on my fathers medications. Buying groceries that will create delicious and sustainable meals throughout the week instead of going out to restaurants several nights a week, will save you a considerable amount of money. One of my favorite “easy to throw together meals” is taking two packets of the Lipton Butter & Herb Rice and mixing in a packet of chicken breast with my own spices (usually garlic, onion, old bay, and some red pepper). This creates a cheap yet awesome lunch that I can take to work several days a week.
Of course another option here is to eat out at a friend’s house. It’ll allow you to get out of the house and spend time with friends, but still save the money (and maybe score you a few leftovers to take home).
Pay yourself first - I’ve read this everywhere. I didn’t really pay it any heed until last month, when I realized I was still pulling out of the regular holiday debt, and hadn’t put any money into my savings in a while. And I figured out that I hadn’t been paying myself first.
Now I have auto-transfers from my checking account into my ING Savings, and started up a separate ING Savings (at 4.5% interest) where I put in about $60/month for a Christmas Fund. This way I will never have the holiday debt again, and I won’t be tempted to buy unneeded items, or that one extra restaurant meal, because the money will already be gone.
Wait a week before purchasing big ticket items over $100 - If it’s still something you feel strongly about in a week, then go ahead and get it. But give yourself that time to reason the pros and cons and whether it’s really necessary.
You’d be surprised how this can affect smaller purchases as well. I’m constantly baffled at a lot of my friends that constantly complain about their financial situation, yet the next week I see them talking about their new purchases, not just cameras and furniture, but items like fancy make-up, new clothes, and trips out to the movies. They really have no right to complain in my opinion. You should see the lengths to which I go with my clothes before I buy new ones.
Buy Used - I have a huge Amazon.com wishlist. I put things on it that I run across and find interesting, but a lot of those items are expensive when you add them up. However if you look at the “Buy used” option, there are several of the same items for just a few bucks. I just found “Personal Finance for Dummies” for $1, and all it had were a few page creases.
I also stress this for cars, as I’ve mentioned before. I saved $20,000 by purchasing a used 2004 mustang last year (with the original warranty), instead of buying a brand new 2006 mustang. Talk about your wake-up call. I will never buy a new car again, even if I had the money to do so.
The point is..you should never put yourself in a situation where you can’t get by if you or your significant other loses their job. If you’re used to living off $70,000/year, and can’t survive off of $50,000/year, then there’s been a ridiculous amount of money overspent in the household, and you should re-evaluate where you’ve been putting all of this money.
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One Response to “Living Below Your Means: Break free from Consumerism”
April 24th, 2008 at 7:20 am
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