Don’t Live below Your Means
Financial Experts advise people to live below their means and diversify. To many people this sounds like smart advice. The problem with following this advice is that you wind up average because it is average advice. It is not bad advice. It’s just average financial advice. Besides, who wants to live below their means?
-Robert Kiyosaki
I have to agree with him on this one.
When you concentrate on living below your means, you are focus on cutting expenses to the bare minimum which leaves you less focus on upgrading your income.
When I was making $27K fresh out of college, I was living below my means. I had a simple lifestyle, now that I make over 2 times that much. I am still living below my means, but now I can save much more and have a better standard of living, traveling abroad, a nicer car, a home and other toys.
So instead of living below your means, earn more than you spend. Psychologically, you will put yourself in a position to keep making more money.
So don’t live below your means, instead live at a higher standard of living!
A person that makes $150K a year can have a better standard of living, than a person making $30K even though they are both living below their means.
So in addition to getting average advice of living below your means, earn more as well. Try not to do one without the doing the other. DO BOTH! Now you are above average.
February 27th, 2008 at 4:52 pm
You cannot do one w/o the other is you want to be rich.
If you want to stay middle class and not move upwards. Living below your means is settling for average
I agree with RK on this one.
February 27th, 2008 at 4:55 pm
average advice gets an average life. However hard work and persistence is the mixture for an above average life.
February 27th, 2008 at 5:28 pm
I say low earners better start living (more) frugally because their standard of living is headed south.
February 27th, 2008 at 5:55 pm
A better standard of living sounds much better than lbym.
The goal is the achieve what others don’t. Do the opposite.
If you do the same as the majority you will be average.
High eraners are the minority they do not follow the rules. they set their own rules.
February 27th, 2008 at 9:51 pm
I think quality of life weighs in on the whole earn more > spend less equation. We all make a decision on what life we want to live – and many can live on less, while more need more.
February 27th, 2008 at 9:52 pm
Wow, Anon #1 was pretty harsh. I’m sure s/he didn’t have to rewrite your whole post to get his/her point accross.
Speaking of the point, I totally agree! Earn more than you spend. I love that.
February 28th, 2008 at 12:28 am
Like most of what RK writes, this is BS. Living below your means is NOT negatively correlated with increasing your income.
If you didn’t live below your means you would be reducing your net worth, not matter what you income level.
I think the point you’re agreeing with is that it is more important to focus on increasing your income than soley on cutting expenses as much as possible. For example, it’s better to be saving 10% of your income when you earn $150Kpa, than to live extremely frugally and save 50% of your income if you only earn $20Kpa.
However, if you didn’t live below your means when you earned $20Kpa, and increased your income to $150Kpa and still didn’t live below your means, than you’d never get ahead. There are plenty of examples of people on high incomes who spend more than they earn on an extravagent lifestyle, and are slowly heading towards the poor house, despite their high income.
February 28th, 2008 at 11:20 am
@enoughwealth–that why I put IT IS NOT BAD ADVICE in bold print.
It’s just average advice, do more!
February 28th, 2008 at 12:36 pm
hmmm….well I think a good starting point for anyone is to start by living below your means. That way, regardless of future income, you have established a pattern for yourself.
That pattern being: not getting into debt, being happy with what you have (more or less), and getting spending under control.
Then, of course, as you focus on your career, you don’t have to use the increased income to pay off old debt, you can use it to fund future dreams e.g. new car, vacations, new house, early retirement.
I pretty strongly feel this one has to come first, because if it doesn’t one can spend the rest of one’s life trying to pay off old debt and get spending under control.
March 4th, 2008 at 12:11 am
‘Live within your means’ isn’t intended to discourage people from seeking ways to earn more. It’s intended to discourage them from getting into debt in order to have more than they can really afford.
I remember reading about a study where they asked people how much more they would need to earn in order to be financially comfortable and happy with their income. People consistently chose a figure around 10-20k more than their current income…no matter what they were earning! Having more money doesn’t assure you a better standard of living, because people on high incomes can get approved for crippling amounts of debt. Living within your means, on any fair living income, brings a level of peace of mind that more money doesn’t necessarily bring.
I’m focusing hard this year on ways to increase my income. But it will never be as good advice, in my opinion, as when I was first advised to live within my means. That will always be wise.
March 4th, 2008 at 11:38 am
‘Live within your means’ isn’t intended to discourage people from seeking ways to earn more.
That was my point. LBYM is just average. Don’t be just average work at both ends. Make more money and live below it.
The fun is that you are earning more, therefore LBYM can also increase
August 19th, 2008 at 10:29 pm
Here’s a way to expand your means:
expandyourmeans.ws
September 4th, 2008 at 6:31 pm
Get a 2nd job or income. I got a 2nd job 17 years ago, working about 10 hours per week extra. It is a consulting job averaging about $40.00 per hour. My hours are very flexible. I usually work a couple of hours a night on weekdays only.It has given me about $19k of extra cash every year. I have made over $300k in extra money in the last 17 years. I have never spent this extra money. I have tracked every dime I have made. I have invested it in stocks that raise dividends every year. My cash flow is great now. What did I give up? Well, I have watched no stupid sitcom TV shows in 17 years. I have never seen American Idol or Dancing with the Has Beens. I am not familiar with any of those shows. I hear people talking about those shows during the workday at my day job. I basically gave up nothing and set myself up with financial independence.
January 29th, 2009 at 4:47 pm
Living below your means is stupid, we are not on this planet to live one step away from poverty.
This is like the myth of multitasking. Its bad because it takes you a lot of time to switch from one task to another, instead you can be doing fewer tasks for longer periods of time and actually get something decent done.
Apply this to investing, and you will see that diversifying is bad, because you are all over, and you are never in one area, just all over.
February 3rd, 2009 at 2:55 pm
When you are “living below your means at $30,000 a year. You are basically starving yourself
October 4th, 2009 at 3:17 am
I don't agree. Living below your means is important regardless of your income otherwise you are a working poor.
October 26th, 2009 at 1:17 pm
The advise on this thread is very bad
. The author thinks that "living below one's means" is average advise, when in reality, this advise is ABOVE AVERAGE.
Why?
Because most people do not follow this advise. To live above one's means is foolish, and this is true for one making $15,000 a year and one making $500,000 a year.
So if you don't want to be average, then live BELOW your means!
November 7th, 2009 at 7:15 pm
This is a great post, if for no other reason than it is making everyone think twice about their strategy.
In truth, we should all be looking at increasing our income if possible.
However, we cannot overlook the value of living within our means.
What most people miss, is that it is easier to save a dollar than make a dollar. I prove this everyday.
What most people get wrong is that living within their means is like being in poverty. This is not true, but it is about making choices.
Moneymonk… keep up the good work!
February 19th, 2010 at 8:04 pm
Yep, do both. A huge number of personal finance blogs seem to be written by people who spend 3 hours cutting and collecting coupons when they could use that time to start a side business making ten times as much soon enough. I don't get it.
Never spend beyond your means — including a portion paid into long-term savings — but beyond that focus on your means, definitely. Diminishing returns from shunning a much needed new pair of shoes.
February 20th, 2010 at 1:04 am
Yep, do both. A huge number of personal finance blogs seem to be written by people who spend 3 hours cutting and collecting coupons when they could use that time to start a side business making ten times as much soon enough. I don't get it.
Never spend beyond your means — including a portion paid into long-term savings — but beyond that focus on your means, definitely. Diminishing returns from shunning a much needed new pair of shoes.