You Control the Money or The Money Controls You
You hear it all the time. It’s a phrase your parents or grandparents used. There’s nothing flashy about it, in fact it sounds boring and confining, exactly the opposite of how you want your life to go.
Yet the concept behind the phrase is fundamental to true wealth creation, and I’d wager every one of our millionaire interviewees follows this motto: Live Below Your Means.
Basic. Fundamental. Essential to creating abundance in your life.
What’s the big deal with living below your means?
To me, it all comes down to one word: control. Either you control the money or the money controls you. Live below your means and you decide when, where, and how much to pay for whatever you want. Live beyond your means and you are controlled. Controlled by payments and deadlines and whatever else is written in the fine print of your credit agreements.
Living beyond your means means you’re using credit. No, you’re not just using credit, you’re buying credit. You spend money on interest. You spend money on late fees. You might even spend money just for the privilege of carrying that plastic around in your wallet.
Living beyond your means means you’re stressed. I don’t care what kind of denial you’re in; I’ve done it, and it’s stressful. Counting down the days until your next payment is due. Counting down the days until your next paycheck will come. Juggling payments. Figuring out which late fee/finance charge will be more so you can decide which payment to put off a few days. Pulling money out of savings. Calculating how much longer that savings account will last at your current rate of draining it.
Of course, if you’re spending more than you earn and not juggling payments or calculating how much longer you can keep these balls in the air, you’re just racking up the charges and piling the debt on for a long future of payments or bankruptcy. Pretending the stress is not there does not make it go away.
Oh crap, the washer broke!
Or the car needs new tires, or you have to have a root canal. Now what? How can you pay for that and make next month’s credit card payment?
That’s why we live below our means because when the washer breaks or Johnny fails the eye test at school and needs glasses, or there’s a great shoe sale, or your friend offers you a free week at a condo in Hawaii, you have the money to take care of the things you need and take advantage of opportunities for things you want.
Living below your means means you have a cushion. You have retirement savings, you have an emergency fund, and you have money to play with– to stock up on essentials at a great sale, to take a spontaneous weekend getaway, or splurge on the newest electronic gadget. Or not. You have the choice. With extra money, you can choose where and when to spend it or save it. With credit payments, you are tied to someone else’s schedule and that someone else is always looking for a way to up your interest rate or stick you with another fee.
You have a choice: you can ride through life on that cushion of a little extra money that comes from living below your means. Or, you can buy yourself some credit and live life watching out for the fine print.
Are you living below your means? If you don’t know, take some time and list all your monthly income. Now take some more time and list all your expenses. (See our post on budgeting for more help with this step) This will take a while, in fact, if you’re not already keeping track, it might take you a few months to really get a handle on where your money is going. That’s okay. Invest the time. Making a conscious decision to live below your means is the beginning of taking control of your finances and could very well start you on the path to financial independence and success. It’s worth it!
Need encouragement?
Here are a few millionaire quotes linked to their original articles:
“If you can’t pay for it, don’t buy it.” from MR, furniture store owner.
“Occasionally I’ll pull a loan, and I try to pay it off, but I’ve kind of bought as I could; if I couldn’t, I didn’t“. From interview with “G”, a Real Estate Broker, Investor, and Entrepreneur.
“Eliminate debt first.” from interview with Mike, owner of advertising company.