We’ve talked about budgets before, but we haven’t really discussed how to live within your means, which is a bit of a different subject. So let’s discuss. (Pictured: Burberry Medium Nova Pop Dégradé Wallet, available at Burberry for $275.)
I think living within your means is a bit like packing a suitcase: you have to edit and curate what you have in your life right now. Stick with me here — whenever I go to take a trip I pull out everything that I want to pack and have it sitting on the bed in one big pile, usually evoking at least a joke or two from my husband. And then I’ll keep adding things to the pile — a t-shirt here, a bathing suit, a dress, whatever — under the theory that hey, that thin t-shirt is just a little thing rolled up. Or that dress, you know, could just be folded in half and laid flat — it barely adds any bulk at all! And then I’ll go to put things in the suitcase, and the damned thing won’t close, so I have to remove things and figure out what I really want. It doesn’t mean that I can’t have the things that come out of the suitcase: it just means that they can’t come with me on the trip.
So: in this analogy, your budget is the suitcase, and the idea of “living within your means” is what you can pack into your suitcase. That said, I think there are two big ways you can live within your means: the mechanical way and the more difficult study-your-budget way. The mechanical way is pretty easy: pay your planned expenses (bills, loan payments, etc) at the beginning of the month, and then put the amount of cash you have left in your wallet. When it’s gone, it’s gone — time to shop your closet, eat from your kitchen cabinets, and suggest going to the free museum night with your friends rather than going out for dinner.
The more difficult way is to actually study where your money is going — analyze it, and make adjustments. Ultimately, I think this is the more fruitful, useful way of living within your means — you end up with more money to spend on the things you want and need, with better habits for the long run, and without quite so many “deprivation” feelings. (I’m a big fan of tracking your finances in general, whether on paper or through something like Mint.com, which is the free tracking software that I use.)
- Choose a place to live that is within your means. This is a huge subject, and one we’ll talk about more in depth in the months to come, but for now: don’t rent or buy more of an apartment or house than you can afford.
- Study your bills. Sure, you may have had HBO and Showtime (and ….) for as long as you can remember — but how much do you really watch them? Similarly, your landline: do you use it? After 9/11, I insisted on having a landline — but after a few years I realized that the primary thing I was using it for was to call myself from work and leave “don’t forget X” messages. Helpful, but not worth the $50 or so I was paying to Verizon on a monthly basis. Ditto the gym: how often do you really go?
- Avoid temptation. If your “going home” route takes you past your favorite store — maybe only take that route home once a week (if at all). If you regularly buy stuff online, leave your credit card at home, or leave it in a drawer at the office that requires you to get up to get it. If you’ve memorized your card number, get a new one. (Is it a bad thing that I have memorized my card number? Sigh.) Sometimes, “temptation” can even take the form of certain friendships — we all have that one friend who insists on going to the $21 martini place to “settle in” for the night, or that friend who insists on ordering a bottle of wine “for the table” and then drinks most of it. You don’t have to stop seeing that person, but you can’t turn a blind eye to your budget when you do see them — so either tell yourself you’ll only see them once a month, or insist on choosing the place when you go out.
- Finally, study the little things — this is kind of like that collection of thin t-shirts in your suitcase; one of them won’t break the bank but they really do add up in the aggregate. So consider this: Do you regularly pay $1.50 for a soda at lunch when you could buy a 6-pack at the store for $3 (or drink water)? Do you have a Starbucks habit? Look at how much you’re really spending on lunch on a daily basis — can you cut that by even a little bit?
Readers, what are your tips for living within your means? For those of you who’ve struggled with this — what lessons have you learned?