Live below your means

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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.”