November 24, 2013
When someone states you should live below your means, what does this mean? How does this happen?
When someone states you should live below your means, what does this mean? How does this happen?
It means spending less than you earn after taxes are taken out of your paycheck. This happens by minimizing the use of credit, saving your money consistently, and investing the money you save wisely.
Well said, Katherine. It works like this.
#1: Write down the number that is left after taxes were taken out of your monthly paycheck?
#2: Write down the number that reflects your living expenses for the month?
Subtract #2 from number #1. Write that number down. That is the gap between your income and your spending. It also reflects your current savings (excluding money going into a traditional retirement account like a 401k).
To live below your means you want to enlarge that gap as much as possible for as long as possible. It really is that simple. Easy? No. Important? Yes. The cost for financial literacy and what it can do for a person? Priceless!