Living below and above your means are terms that are thrown about quite often, but many don’t truly understand their significance. To live above your means is essentially spending money that you don’t have or spending money that you can’t afford in the present. In contrast, living below or within your means is spending less than you can afford in the present, giving you room to save and invest in your future instead. With the definitions out of the way, what are the benefits of living within your means?
Enjoy life debt-free
Living above your means often includes gathering debt, whether it be in the form of credit card debt, car finance or personal loans. You’re charged interest on these and if you don’t keep up with repayments, the cloud of debt can loom over you for years or even decades to come. If you pay off all existing debts and live within your means by only spending money you have in your account then you can live debt free and reap the rewards of life without repayments.
Build your future
Taking on debt to live above your means in the present is only going to steal money and wealth from your future self. Repayments will chew up your disposable income for many years to come and you’ll be less able to save and invest in your future. We’re seeing this issue with younger generations these days who are struggling to get on the property ladder. Living below your means will help you to save more and build a financially stable future for yourself.
Less stress
Living above your means is often done to give people an outward appearance of success or wealth when in reality it’s doing the absolute opposite. Forget about what other people think of you and whether or not you have the latest fashion or technology – instead, live below your means so you can afford anything you want when you’re older and not have to worry about making repayments for the rest of your life. A debt-free life is a less stressful life, do you want to live one?
More freedom and flexibility
Some might think that having access to more (borrowed) money grants them freedom. However, taking the easy route in the short term only limits your freedom and flexibility in the long term. The more debt you accrue, you longer you are financially tied down and reliant on working to afford repayments – whereas building your future can help you to rely less on the traditional working lifestyle and start to plan the life you really want. Debt can control you and stop you from progressing in life at the rate you want to – so stop taking out credit and start saving!
