Live Within Your Means: As Soon As...

One of the biggest steps towards reaching any goal is getting started. Procrastination is the enemy of personal progress. There actually is a time and place for it, in procrastinating the distractions that do not get you closer to your goals. However, the time to get started on important things in your life is now, this minute, at this very moment.

Dr. Seuss presents this idea quite well in his classic Oh, The Places You'll Go!

You can get so confused
that you'll start in to race
down long wiggled roads at a break-neck pace
and grind on for miles across weirdish wild spaces,
headed, I fear, toward a most useless place.
The Waiting Place ...
... for people just waiting.
Waiting for a train to go
or a bus to come, or a plane to go
or the mail to come, or the rain to go
or the phone to ring, or the snow to snow
or waiting around for a Yes or No
or waiting for their hair to grow.
Everyone us just waiting.
Waiting foe the fish to bite
or waiting to fly a kite
or waiting around for Friday night
Or waiting, perhaps, for their Uncle Jake
or a pot to boil, or a Better Break
or a string of pearls, or a pair of pants
or a wig with curls, or Another Chance.
Everyone is just waiting.
NO!
That's not for you!
Somehow you'll escape
all that waiting and staying.
You'll find the bright places
where Boom Bands are playing.

I had an income producing investment that got tied up in some legal issues. The income stopped and many of those who had invested were waiting with baited breath for every twist and turn in the case. Many, including myself, put everything on hold pending the outcome of the case. Finally I realized that I had wasted months that I could have moved on and started finding another solution. To this day, over four years later, the case is still in limbo.

Live Within Your Means: How You Think

In Robert Kiyosaki's best selling book Rich Dad, Poor Dad he states that 95% of the people control 5% of the money and 5% of the people control 95% of the money. He also states that the only real difference between the 5% and the 95% is the way they think.

They don't just think differently, they think oppositely. 95%ers look at money as a way to get things. 5%ers look at money as a means to make more money. Robert calls what the 95%ers do "turning cash into trash."

Now every time I go to purchase something, I try to think "is this going to be of lasting value, or will it end up in the dump in 5 years." Or, as Robert says, am I "turning my cash into trash."

When I got my cell phone, a friend of mine states that I was getting ripped off. He said that for I my another $10 a month, I could get a lot more minutes. He was looking at his money in terms of how much he could buy with his money instead of determining what he needed and buying no more. I looked at it like I just saved myself $120.

I am not saying that I am a 5% thinker, but I think I am heading in the right direction. I think it is important to associate with people who are closer to 5% thinking than we are, and continuously reading books by 5%ers to keep your thinking right.

I have found that there is another aspect of thinking that is equally important. What do you think about when you are not thinking? Most of us are influenced in what we think about by our surroundings and current circumstances. I have found that the more my thoughts dwell on my goals the more I move towards accomplishing them. The more I let my thoughts be influenced by my circumstances or my surroundings, the more my goals seem to slip away. I have got in the habit of asking myself questions when my thoughts go idle. Questions like "what would I do with $100,000?" or "how can I reach the next step?" Simple questions that get my mind on the right track.

Live Within Your Means: Make More Than You Spend

Many people, when they hear "live within your means," think of cutting back and reducing their lifestyle until they spend less than the make. They often do not think of the other side of the coin, make more than you spend. Many think of their income as fixed. They do not even consider that they can quickly and dramatically increase their income. In fact, most people reading this are probably already starting to think things along the lines of "well, he doesn't know what I do for a living" or "that may work for some but not in my case."

With a balance of spending less than you make and making more than you spend, you can dramatically increase the speed at which you reach your financial goals. Keep an open mind. Consider the possibility that you can increase your income.

There are two things to keep in mind when working towards increasing your income. First, most increases will not come immediately after the improvements have been made. Second, the improvements you make need to be in increasing your value to others. Give more than is asked. Add more value to those you serve. You will not see changes in your income right away, but you will see changes.

Henry Ford said, "if you think you can do a thing or think you can't do a thing, you're right." You will not continuously add value to others unless you believe that it will eventually pay off. In order to help your thinking, your belief, I would suggest the following books. Each gives some aspect of adding value to others.

The Go-Getter
Winning Every Day
How to Win Friends and Influence People
Launching a Leadership Revolution
Personality Plus
Who Moved My Cheese?

Live Within Your Means: Spend Less Than You Make

When people say "live within your means," they usually mean "spend less than you make." In the era of easy credit (yes, it is still too easy to get credit) the mantra seems to be "get it now and pay for it later." We can only go down this path for so long before the day of reckoning comes.

Spending less than you make sounds simple enough, just don't spend more than you make. I have found that there are a few things that can derail your efforts to spend less than you make.

Debt Payments

Servicing debt is the second largest expense for most people (taxes being the first). From home to car to college to credit cards, most of the controllable expenses are to pay interest on debt. The first thing to do when you find you are in a debt hole, is stop digging. If you can't pay cash, then you don't need it. Whenever you buy something with debt you end up paying much more than the original price. I've heard it said that if it's on sale and you buy it with a credit card, then it's really not on sale.

I would suggest not trying to pay extra on debt until you can live completely within your means for a year without increasing debt. Debt payments are an expense, which drains your income. If you go crazy making debt payments and then when an unexpected expense comes along and you end up putting it on a credit card, you can end up being worse off for it.

Unexpected Expenses

No matter how well you plan, there will always be unexpected expenses. Cars break down, water heaters leak, family gets sick, things just happen. While you cannot know what and how much, you can leave a margin of safety by building up some savings. Put away a small amount on a regular basis, and only tap into it for unexpected expenses that are really a need (sales are not unexpected expenses). Having that cushion will give you peace of mind and financial confidence.

Irregular Expenses

There are some expenses that happen infrequently. These could be insurances, taxes, subscriptions, etc. While they are expected expenses, they can be easily forgotten. This can cause financial stress when they come due. I found that creating a separate account for these type of expenses really helps. You figure out how much you need to put in each month (or paycheck) and then only use that money to pay those expenses. You can also have the money in an interest bearing account

Variable Expenses

Some expenses vary month to month and can vary dramatcally by season. These are usually utilities, such as electric, gas and water. What I did to help with these expenses was pay either the average of the last 12 months or the amount of the bill, which ever was greater. Eventually you will only be paying the average. And if you round the average up to the nearest $5 or $10, then you won't have a problem when energy prices jump. My gas bill now has a 4 month credit (I could skip paying my gas bill fir 4 months).

Live Within Your Means: Suggested Reading

Here are the books that I read to study for this goal of living within my means. I'll be referencing them in many of the posts. If you purchase from Amazon from the links below, you will be helping me support The Freeman Society website.

Spend less than you make

The Richest Man In Babylon
Rich Dad, Poor Dad
Think and Grow Rich
The Millionaire Next Door
Success! The Glen Bland Method
Conversations with Millionaires

Make more than you spend

The Go-Getter
Winning Every Day
How to Win Friends and Influence People
Launching a Leadership Revolution
Personality Plus
Who Moved My Cheese?

Live Within Your Means

I started The Freeman Society as a way to keep myself on track to reaching my goal of financial independence in the next 10 years (and some lofty goals for the 10 years after that). This last year, 2008, I successfully completed my first goal. This year, while I'm working on my second goal, I'm going to share every week something I learned in during my studies last year.

My first year goal was to live within my means; spend less than I make and make more than I spend. I specifically break state it that way, break it out into two parts. Most people focus on spending less than they make. What they don't focus on is making themselves worth more to help the problem at both ends.

I'll be posting on a new different topic every Friday on what I learned in my experience, what I've read and from speeches I've listened to.