Jeanne Sahadi takes the simple question, “How do you define ‘living within your means?’” and turns it into some kind of poorly-dubbed martial arts movie or strange game show (if you judge by the title of the article). Nevertheless, I agree her with her analysis of the above phrase:
Ideally, I’d define living within your means as spending less than you earn, saving some of your income and having no debt. The exception being debt that lets you build net worth, such as buying a home, getting a degree or making a home improvement that builds equity.
The author outlines an example expense analysis of a $75,000 income household living with its means.
|Car Loans:||$ 400|
|Retirement Savings:||$ 500|
|College Savings:||$ 300|
Figuring those numbers as a percentage to the total income, I am definitely paying too much in some areas. Take, for example, transportation. If a household with an income of $75,000 should only be paying $100 for parking, gas, and tolls, then I’m way “ahead” of the game. I spend about $250 on transportation a month just for work alone, including tolls and gas. The $250 doesn’t figure gass and tolls when traveling to visit friends or volunteering on weekends. That’s more than double the example, a household earning almost twice my salary.
Simple solution: I need a better paying, closer job.
Updated July 14, 2010 and originally published October 28, 2004. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.