I came across this interesting piece that originally appeared on fellow personal finance blogger, Financial Samurai's website, about a couple (both lawyers) who earn $500k a year and still don't have a lot of “leftover” at the end of the year – relatively speaking.
The couple was open enough to share their income / expenses and a quick look shows how making more – can cause you to spend more:
Although the pair is maxing out their 401k's every year – there seems to be a lot of expenses that seem extravagant or unnecessary (but, that tax rate – wowsers!).
This couple is not an exception. And, I know this from my own situation: the more money I've taken in, the more I manage to spend. It's almost as if I've felt “entitled” to more.
It seems rare to see a “wealthy” person living below their means (although Warren Buffett seems to be living well below his means in his modest home). And when we do, it's almost as if we think something is wrong. “Why aren't they living it up?!”
When I was first began my get-out-of-debt journey – I started following Dave Ramsey‘s mantra, “live like no one else – later you can live like no one else”. While I wasn't gunning to live an extravagant lifestyle after ridding myself of debt, I liked the challenge of living well below my means to achieve greater financial freedom.
Obviously, this is harder to do when you have a family and there are more people involved to “get on board.” But, it can be done and many are doing it today.
Missionaries as inspiration
When I was living with my two roommates downtown, we attended a large church that sent out a lot of missionaries. I was fortunate enough to spend some time with a few before they left the country.
One of their practices in preparation for becoming missionaries was to downsize their life. They'd rid themselves of a lot of unnecessary things they wouldn't be needing. They'd move into smaller housing. Cut expenses. And, often, they would get rid of their vehicles and opt for biking around town.
This lifestyle “deflation” also inspired me to live in a similar manner. I realized I could control my finances just by making different lifestyle choices.
What impresses me today
I'm no longer really impressed when I drive by the guy in the Tesla – or the large home on the lake. Of course, these are neat things – but I have no idea if the owners are living much like our lawyer couple: over-extended and just getting by.
What is more impressive are people who are make sacrifices with their finances by living below their means, building assets and giving.
How can we live and get by in today's environment? How do you do it?
Need to cut some expenses? Try having a look at your electric bill. Charlie offers some tips.
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