The Difference Between Living Below Your Means vs Living Within Your Means
Living Within Your Means
Most people seem to offer the advice, “Live within your means” which means your expenses should be less than what you make. For example, if you make $1,000 a month and your monthly expenses are $980 a month, then you have $20 left over and you are living within your means- congratulations!
However, what if one month, your car breaks down and you get a bill from the mechanic for $100? If you’re still making $1,000 with $800 of monthly expenses and you have $20 left after your monthly expenses…then you’ll be $80 in debt for the month.
The Reality: More than half of Americans can’t afford a $500 unexpected expense
In a recent study by Bankrate, 63% of Americans said they wouldn’t be able to make a $500 unexpected payment. $500 may sound like a lot, but it really isn’t- here are a short list of things that could unexpectedly pop up:
-car breaks down and you need an expensive fix
-end up in the emergency room and you have to stay a night or two
-Need to get an emergency root canal or a few teeth filled at the dentist
If you’re reading this and feeling bad about the current status of your savings account- you’re not alone in your saving woes.
I know first hand how an unexpected health issue can throw you off guard.
Living Below Your Means
- If you can take a few small steps to consistently save $20 extra per month and put that away for a rainy day, then after a year, that will be $240 in savings in a year.
- If you’re looking to save $1,000 in a year, that’s $83.33 you can need to save a month, or roughly $19.23 a week.
Stay tuned for a post later this week about 6 easy ways Mr. Navigating Adulthood and I use to save money towards our rainy day fund.