Going to go off on a little bit of a tangent before we get into this post…
Long term readers of this blog will know that I have a long commute to and from work. Between the two of us, we travel almost 140 miles every day. Not only is this costly from a fuel point-of-view, but it means we are putting serious mileage on the clocks of both our cars. In previous posts, I have discussed how Driving at 50 MPH can increase economy by up to 30%, but choosing the right car is fundamentally important. What is the point saving 30% fuel by driving a gas-guzzling sports car at 50MPH so that you can increase the economy from 15 to 20 MPG, when you can start with a car that has a fuel economy in the 60s and drive at a normal speed?
I like to compare this idea to personal finance – there is no point trying to shave 10% of the cost of your lunch by not buying that extra side portion, when you spend a £5 a day eating out; where you could take your own lunch and enjoy a few extra bits on the side; and still save a fortune. Sometimes we have bigger problems than saving just a couple of pounds on a loan, or being extra frugal so we can make a few extra over-payments on our mortgage – when really, we shouldn’t have bought such a fancy car and that big a house in the first place!
Frugality is NOT Always a Good Thing
The most popular post (by Search) that I have ever written is called ‘Defining Purpose and the Importance of Moderation‘. Looking back on this post, I am very proud of it and always want to live by it – the key message that it tries to convey is that it is OK to spend money, it is OK to drive at the speed limit and to eat out. It is OK to buy a house and to go on holidays. The moderation part however is that we need to ensure that we have the right car to drive at the speed limit, we eat at the right restaurants that we can afford, we buy a house that we can comfortably afford the mortgage for and that we go on holidays where we still have money left over to do activities.
Why buy a Ferrari and drive it at 40mph to save money on fuel?
Why buy a house that you can’t afford to furnish?
Why eat at restaurants that we can only afford a starter or a desert?
Why buy a motorbike when you can’t afford the insurance?
Live Within Your Means
My mum said this phrase to me at University countless times. I always just brushed it off as another one of those ‘Mum Sayings’. Don’t drink too much, Be Careful, Don’t stay out too late, Make sure you get a good night sleep – You know, one of those ones! In reality, this is probably the best piece of advice that I have ever been given.
I think we can apply this phrase to almost every single expense that we have:
Clothes – If you like designer labels, fine; just buy a label you can afford. Gym – Don’t join a fancier gym with an off-peak membership, when you would better use a cheaper gym with a peak membership
Rent / Housing – Choose somewhere that is convenient and affordable, not somewhere that is too big to take care of
Mobile Phone – Don’t choose an expensive phone at the detriment of inclusive minutes / calls
I think you get the point. As I said before, there is no point having a Ferrari if you can’t afford the fuel!
Back to the Cars
Going back to the example of commuting, I have come to terms with the fact that I am never going to have a ‘sporty’ gas-guzzler of a car so long as my commute is this long. A few months back, it came the time to upgrade my car and I searched for the best possible model for a combination of ‘true’ fuel economy (i.e. what you get traveling at 70) and longevity. I narrowed my choices down to either a Ford Focus or Honda Civic; both cars had comparable safety stats, fuel economies (diesel) and reliability ratings.
I chose between two cars that would enable me to drive at a normal speed and still save a lot of money on fuel. Instead of frustrating myself (and other drivers) by traveling at 50, I could drive a bit faster knowing that this would not adversely affect how much it would cost to fill the tank.
What YOU Should Do
Consider your own lives and take a few minutes to think about areas where you might be living outside your means. Whether it be shopping at supermarkets that you can’t really afford to buy all the things you really want, or planning a holiday where you may not be able to do all the activities you want – there is definitely something we can all do to make our lives a little better.
Any of you done something to live outside your means recently?
This post was featured on the Skint in the City, Mo Money Mo Houses, thank you!
For me it’s eating out. Well it’s not so much that I’m eating outside of my means if you will, but I definitely spend more than I should and eat out too frequently in relation to how much money I make I think.
Oh yes Mo, me too! When I realised I spent only 3% of my take home pay on grocery food (and therefore make at home meals), I was shocked. Undoutedly my eating out is regular, and far far higher in $ amount. So this week, I’m saying not to the usual lunch out with a colleague (once or twice a week usually), and to weeknight ‘easy dinners’ (eating out or take away). I’ll leave myself two weekend dinners, and hopefully with this restraint, I’ll start to see my ‘means’ being lived under better!
I think the only thing that really applies to me is “don’t live in a city that is so expensive you can barely afford to enjoy yourself there.” I kind of feel that’s where I am right now, unless I get a roommate, which at 42 I don’t want to do. Other than that I think I do a pretty good job. But since housing is a biggie, I need to do some serious thinking.
Spend less than you earn. The simplest phrase in the world and the hardest thing to do. Thanks for the reminder and the push!
Thanks for the kind words Tony 🙂
We always live within in our means and because of that we can enjoy our lives much more than trying to keep up with the “Jones.” Instead of building a mcmansion we have a reasonable sized how and can enjoy eating out every now and again.
I LOVE the quote and it’s so true. Living below your means is so simple yet so many fail miserably at it. Thankfully we’ve got it down.
Generally we live within our means. I have been feeling guilty lately because we just dropped $270,000 on a brand new house, but I think we got a good deal on it.
For the first time in my life, I’m living well within my means. That doesn’t mean I don’t go out occasionally, and I even buy stuff when I need it, but there’s a difference. I don’t feel anxious spending $20 on a nice pan, because I haven’t spend every dollar in my paycheck already. Even though I want to put every possible dollar towards debt until it’s zero, I know not to go so overboard that I get resentful and overspend later. I leave a $100 buffer each week. That used to be IMPOSSIBLE. Now I think, $100 or $150? Yeah, I can survive on $100, the gas tank’s full, etc. And I feel relaxed! It’s amazing!
Such good points. I know a few people who have recently purchased cars (cars I know they can’t afford). While that bmw might look great while you’re driving it, you may as well drive it around the block a couple of times because you can’t afford to drive it to a local restaurant for dinner because you’re broke.
I would have to say that I’ve lived within my means for 20 years. It SUCKS!
Starving-artist level of means it’s BRUTAL. Thankfully I have a place to live that understands the grim financial reality I have faced.
Thankfully my investment strategies are working well. (Hard to believe how much blood I’ve squeezed out of those stones) And over a period of 20 years long service I’ve amassed a small nest egg which an investment banker might spend on oh… a new sail for his sailboat, OR a new set of tyres for his Bugatti.
It’s enough money to stabilize my meager pittance and while it doesn’t yet pay for everything, at the rate I’m going, it should be able to do so in 10 years.
So while failing miserably on my life goals of fame and fortune through my craft, AND missing the mark on freedom, 27, and 37… It looks like I might be able to manage freedom 47.
So while yes, my recent forced upgrade of my computer and computer storage devices (due to a horrible computer explosion) is WELL above my cash-flow means, I’m still increasing my net-worth month after month even though I consistently maintain negative cash-flow from my professional activities.
It’s all about balance. As long as you live beneath your means and save enough for the future you could live in a bigger house and drive the car you want. However, if your living at or above your means then you need to take a look at the underlying reasons.
Love this post! Yes, it is all about living within your means and knowing what really makes your heart happy – which is what I am trying to teach my girls. We all make a finite amount of money and we can live a great life within that amount of money if we know what we truly want, rather than chasing after a bunch of stuff we don’t. I shop, We travel. Live in a nice home. Drive a nice car … but all within our means and I don’t feel an ounce of guilt over it – nor should I. Being frugal doesn’t mean you can’t enjoy things – to me it means being money conscious and not living in excess so you end up in debt. Excellent post!
YES! This is exactly what I am talking about Shannon 🙂 So glad we are on the same wavelength. Any nice holidays planned for 2013?
Yes! We’re going on a Disney Cruise this summer. It’s been our big family save goal for over a year now. The girls are ecstatic and Mom and Dad are pretty excited too. 🙂
Congrats guys – that is going to be amazing. Have a great weekend Shannon
I’ll make a confession. I have two vehicles. One is an F150 Gas Guzzler which onyl gets used to go to the beach, to get supplies for a project or garden or when I have to carry or tow something heavy. It does not get much use. The other is an 05 Prius, that one is my commuter box, I have a 75 mile round-trip commute and that prius keeps my gas expenses to a minimum.
Once again the simplest advice is the best!
🙂
Also, spending a lot of money on “things” is what a lot of people do to try and feel good. Living with one’s means is despairing to someone with a poor attitude to money and life in general.
I get asked why I am so hard on myself in terms of spending by people who are spend thrift yet spiritually malnourished.
Get a productive purpose in life and living on less will go towards achieving that end. I recommend reading “The Richest Man in Babylon”.