|Living below your means: Control
It's so simple and yet so few people
do it. The easiest way to build an ostrich-size nest egg is by spending
as little of your money as possible. We're not suggesting living
on beans or driving a car that should be in the junkyard -- just
making a conscious effort to monitor spending and make cuts where
possible. Essentially, it's called living below your means.
Why would you want to do this in a world where
easy credit gives us access to the latest electronics, upscale restaurants
and dream vacations? There are as many reasons as there are people.
It can help guarantee you'll have enough for retirement, or that
you'll be able to retire early, or pay for college, buy a summer
home, take some time off to learn a new career -- the list goes
on and on.
Save more, stress less
Living below your means -- or LBYM -- also can mean life with a
lot less stress. It would be nice to not worry about where the money
will come from if the car breaks down or the dryer conks out. It
would be great not to have to juggle bills each month to figure
out which can be paid and which have to wait for the next paycheck.
It would be great to not live from paycheck to paycheck.
Trying to make this work can leave you feeling like
a salmon swimming upstream. Our entire culture makes it easy for
you to get into hock up to your eyeballs.
"This is the first full-blown generation in which
we have a credit card economy," says Richard Boyum, a psychologist
at the University of Wisconsin at Eau Claire. "We used to have
layaway -- you didn't get something before you could afford it.
We're one of the few cultures on the planet where getting ahead
is more important than getting by."
Paul Minsky, a California psychologist who specializes
in money issues, says not being in debt may make you look incompetent.
"The issue isn't so much that not being
in debt represents safety, security and freedom, but rather that
your expenditures represent your competence. We, basically, are
a very secure people, so the fear of insecurity that a nest egg
would stave off is less prominent than the fear of not having made
it. Being competent is demonstrated in our culture by the things
you buy. The fear of missing the train is much greater than the
fear of getting run over by the train."
Spend first, think later
Boyum, who also teaches, says many students already have
bought into the spending culture.
"A lot of students have credit cards,
loans, they're going out to nice restaurants on the weekends --
they're living beyond their means. Once when I was teaching a course
I asked, 'What would happen if you only bought things when you could
afford them?' One student raised his hand and said 'It means we
could actually have 18--percent more stuff.' I realized he was talking
about the interest rate on his credit card."
"Our society promotes more spending, more
credit card debt," Minsky says. "What do you do when you
don't feel so good? Most people say they spend -- that offsets the
stress of being in debt. If you undertake a program of debt reduction
it's counter cultural. More is better than less, shop 'til you drop."
According to Minsky, not being in debt is usually
psychologically healthy, but there are exceptions.
"The pressure that might ensue by not
starting your own business might be more devastating than having
a nest egg and never taking the chance. A lot depends on where you're
starting from and where the risk is. We've always been a country
of risk takers."
Boyum believes we Americans might be a happier bunch
if we buck society and scale back.
"Emotionally and psychologically, if you
want to have it all you can't and you'll be unhappy trying to get
it. The psychological disorder that's increased the most in the
last decade is anxiety -- that's partly tied into conspicuous consumption."