Why You Should Live Below Your Means And Not Just Within Your Means

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.

From a recent Forbes article:
“It’s not news that Americans are terrible savers. In November, Pew Charitable Trusts reported that one in three American families have no savings at all. In December, Magnify Money released the results of a study that found that 56.3% of people have less than $1,000 in their checking and savings accounts combined.”

I know first hand how an unexpected health issue can throw you off guard.

Last year, I found myself in the ER because I had a kidney infection [exactly 6 days before my wedding, but that’s another story]. The amount I paid after insurance was roughly $430- this includes the ER copay, medication, and lab tests. If I did not have insurance, that amount easily would have been at least $1,200. I was only in the ER for less than 5 hours! 
I’m very thankful I had savings to cover my hospital stay [I mean, I was literally walking down the aisle in 6 days and at the time, I had had a high fever for 4 days]. That hospital stay really forced me to rethink my personal finances- I was lucky that I was only in the ER for a few hours and I didn’t need additional tests or treatment. If I had stayed in the hospital overnight, I’m sure my medical bill would have been even higher.

Living Below Your Means

This is why you should actively try to live BELOW your means. I know this can sound a little scary and you might be thinking, “I have a hard time making ends meet as it is.” But consider this:
  • 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.

Why You Should Live Below Your Means And Not Just Within Your Means

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9 Comments

  1. Wow more than half of Americans having only have $1K in their checking and savings? That’s a pretty high number. They need to know how to save and living below their means is one way to do it.

  2. I’m suprised at the number. It’s really sad because that 63% of people are living too close to the edge. What a miserable existence. And you can’t always fault them because when you have that little there’s no incentive to build.

    Also yikes about the kidney infection. Well 6 days before is better than day of right?! 🙂
    Lily @ The Frugal Gene recently posted…Thrifty Amazon Haul – Car-Free & Gettin’ My Frugal On {Volume #001}My Profile

  3. So true! It really is tough though. We already live very frugally, and we don’t even pay rent where we are! We are paying down some debt, but luckily my mom lent us the money so we owe her instead of the bank, which means no interest! But still, between paying down our debt, making sure our bills get paid on time and putting food on the table, pretty much all of our money is eaten up by the end of a pay period. We still make sure we put money away for our daughter’s education every month, we put a little bit into our retirement savings and we try to put a little bit aside for savings. I think at the end of the day you just have to do the best with what you’ve got and be conscious of your spending, weighing your needs vs. your wants and making cuts wherever possible. Great post!

  4. So true! It really is tough though. We already live very frugally, and we don’t even pay rent where we are! We are paying down some debt, but luckily my mom lent us the money so we owe her instead of the bank, which means no interest! But still, between paying down our debt, making sure our bills get paid on time and putting food on the table, pretty much all of our money is eaten up by the end of a pay period. We still make sure we put money away for our daughter’s education every month, we put a little bit into our retirement savings and we try to put a little bit aside for savings. I think at the end of the day you just have to do the best with what you’ve got and be conscious of your spending, weighing your needs vs. your wants and making cuts wherever possible. Great post!

    1. Thank you for the thoughtful comment! I completely agree that with spending, you really have to pick and choose what you spend money on. Even if it’s a little bit every month, it definitely adds up over time!

  5. I absolutely agree! This is great information. Emergency funds, sinking funds and more all need a place in the budget.

    1. Agreed! When I started living on my own, I had no idea that I was supposed to take care of my dishwasher. I thought it would somehow magically do that on its own.

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