This idea has been swirling around inside my mind for almost two years, so I guess it’s time to put it on paper. Now, some will say, “Why’d wait TWO years if you have the answer for us!?!?” I don’t know. I guess I’m busy…and perhaps a bit lazy…but more than anything, I really wanted to turn my thoughts over and over in my mind to make sure I wasn’t telling you something misleading or incorrect. Two years later, I believe this is a big part of the answer.
The secret to joyfully surviving a recession or to living it through it basically unscathed is this:
Decide to live beneath your means.
Now, the first part of that statement is SUPER important. You (and I) must make the mental decision, must take that intellectual step. If it’s forced on us—which is what a recession or depression may really do, then there is no joy in the living. We find ourselves bitter, jealous, on a long-term ‘pity-pot’…if not in debt, homeless or worse. That is not living joyfully. That is nothing more than acquiescing to and accepting the situation thrust upon us. So, step one is to make a decision.
And, that decision has to be this—we live beneath our means. What does that mean? Well, let’s say I bring in $1000/month. Most Americans will spend all of that…and charge a little more on the credit card. That is living beyond ones means—spending more than one actually has or earns. When we live like that, we are always just one small step from a personal economic disaster! Others will budget in such a way that they spend ONLY what they bring in…and not a penny more. They will pat themselves on the back…and believe they are doing well. They are doing BETTER than those who live beyond their means, but they are still going to get ‘smacked’ when the down-turn, recession, depression comes along.
Living beneath ones means is living on less that 100% of the income.
In our family, we live on 80% of what we make. We’ve done that for over 20 years now…and we’ll keep on doing that. My parents gave me very sound financial advice when I was just a teenager. In fact, I can hear the mantra even now: “10% to the future, 10% to God, and the rest with joy and thanksgiving.” So, that’s what we do.
We put 10% of the income in our annuity—untouchable savings for the future, for that day when retirement comes. Then, we give 10% to God—through the church, to charities, to those in need, to good causes. That leaves 80% of the income for us to spend with joy and thanksgiving. Of that 80%, we decided to take 10% of it and put in what we call our “holiday/house fund.” The holiday/house fund is just that—when we take holiday or when we need to do something big to the house, we pull a little cash out of that account (yes, it’s a separate account at the bank). Then, we live on what’s left.
Now, that does NOT mean that we spend every bit of what’s left. In fact, we strive to make spending a kind of game—how cheap can we eat out (this week, my wife, my son and I had lunch at Chinese restaurant here in McAllen…and we all ate for $9.48!! That’s the total bill…not per person), how little can we spend on energy (thermostat set on 83F during the day…clothes hung outside to dry), how can we eat cheaper at home (no red meat, chicken once or twice a week, and lots of fruit and veggies…and this is cutting our healthcare costs as well!), where can we get the best clothes for the least (my wife and daughters bring home designer clothes from our local thrift store—usually $3/item or less.) So, playing this ‘game’ is a way to make sure we live beneath our means…and STILL have some left over.
We do have a budget, and we know how much we need each month to pay the house payment, the utility bills, buy food, etc. So, when I get paid, we leave the necessary amount in the checking account…and move any ‘left-overs’ to the holiday/house fund! So, it grows…and we joyfully survive the economic issues of life.
The catch: People really need to arrive at this decision to live beneath their means long before the bottom falls out. I guess this is why I was reluctant to write and post this piece—it’s arriving a little late. Or, it may be arriving right on time. As people struggle to make ends meet, maybe they are open to thinking in new directions. And, no time like the present to prepare for an uncertain future!
Why do we spend it all anyway?? Mainly, it’s nothing more than a result of successful advertising. We taught our own children when they were small that advertising is basically “people trying to sell you stuff you don’t need.” Still, there is a LOT of cultural pressure to ‘climb’ on up to the next step—bigger house, newer car, bigger TV, latest “iThing.” We buy used cars—always—and pay cash or only finance a fraction. We look for “quality” used cars on Consumer Reports list. And, we drive fuel –efficient Ford Focus (2008) and a Toyota Matrix (2005)…and I ride a Suzuki 250 motorcycle to work (80+ mpg!!!) Our house that we bought last year is 13 years old…and 1250 sq.ft. Our children are all hitting that age where they’re home less…and leaving for college and life in the next few years. Besides, who wants to heat and cool and clean a 3000 sq.ft. home?!? (More unnecessary expenses!) We have cell-phones made for talking and texting…and our computers surf the web just fine, thank you! My family bought me our first flat screen TV two years ago for Fathers’ Day…and they researched and found the best for the least. My 32” Samsung (only TV in the house, by the way…intentionally!) will do us just fine for years to come. And, if not…there’s money in the bank!
So, this on ended up a little longer than usual…but wanted to help you see that by intentionally living beneath your means, you can avoid many of the stresses of economic crises…you will be better prepared for any future crashes or bumps…and you can do so joyfully! We laugh a lot at our cheap selves. We explain why we live as we do to our children. And, when we go on holiday, we come home debt free!
Decide…to…live…beneath…your…means—while the decision is yours to make!
Jon ~ July 2012
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