How many times have you heard “live below your means”? What does it really mean and why do it? In order to move forward financially. There are two sides of the same coin:
Live below your Means
Invest the rest
20 Nummi Coin from the 7th Century
Living below your means is just not using all your resources at once. If I was a caveman I wouldn’t eat all the meat of an animal I hunted all at once. I’d preserve some for later. That way I could invest time in doing something else productive (maybe making more arrows for my bow) This way I’m investing the rest of my time.It does not matter how much money you make. Just look at all the professional athletes who go bankrupt. Look at the SI article on the subject. HERE
It stated 78% of former NFL players were bankrupt or under financial stress. It reminds me of people who win the lottery who are broke 2 years after they had won.It proves the point no matter how much money you make you will go broke if you spend more than you make. This is a effect of not living below your means. People during the great depression were forced to live below their means if they were to survive. These were the same group of people who reused nails. They knew the value of one dollar so they were able to handle the cash when their means increased.If the bankrupt NFL players had lived below their means put some money aside when they were active they would have a more content life financially. It is easy to point to others who “have it made” and say that would never happen to me if I had that kind of money. If you live in the US and are average you are making that kind of money relative to the rest of humanity
So the question is if you do live below your means what do you invest the rest in?
- Your education – add a degree or a skill
- Build a business
- Learn about stocks
- Buy assets which increase in value over time; like real-estate
Living below your means and investing the rest enables the ability to self insure for small things in the beginning. As you build more wealth you self insure in bigger and bigger ways. If you build a emergency fund to raise your deductible on your car insurance you save premiums. This enables the money saved to be re-invested. This savings could be possibly used to pay ahead on the phone bill by one month. You have a month buffer on the phone bill self insuring against late fees. Who knows where the momentum will take your finances?
The challenge: do something to live below your means, then invest your savings. Let me know by commenting on the blog.