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Why I Live Below my Means
Old 03-19-2009, 11:07 PM   #1
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Why I Live Below my Means

I was talking to a friend about a week ago. This friend is the classic high wage earner and big spender (and to his credit very generous with others, aa great guy). He mentioned to me that he had taken everything out of equities the day before because he has lost $300-$350k and could not afford to lose any more due to his financial situation, specifically mentioning payments on four cars and a boat, college for two kids, and mortgages on two homes (primary plus vacation).

My friend does not have a choice. If he or his wife gets laid off, which could happen, he will need to money, and therefore I think his decision was sound to avoid further losses.

I however, do have a choice. Over the past week the market has gone up about 10%, and I have enjoyed the rewards. Now I know this is probably a temporary rebound, and it WILL drop again at some point, but I can afford to stay in for the long haul. At some point the upward movement will be permanent. When this happens, I will reap the rewards, but my friend will not be a position to do so. Ironically, he needs the money more than I do, but I will get the gains, and he will not.

I cannot imagine living with the financial pressures that he has.
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Old 03-20-2009, 12:13 AM   #2
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Sure. Live below your means, and they will last longer, maybe even multiply. Perhaps the common trait of LBYM'ers is the ability to delay gratification.

The question to ask then is how much delay is enough. Till one is in his 60s? 70s? I have often wondered myself, as I am in my 50s already. Am I an optimist in the market to even think I will have the luxury to ponder that question?
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Old 03-20-2009, 02:03 AM   #3
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Ive come to the conclusion do whatever makes you happy. If its LBYM or LAYM do it. We all die and feed worms. Just understand the consequences of your actions. Or dont
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Old 03-20-2009, 05:21 AM   #4
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Ive come to the conclusion do whatever makes you happy. If its LBYM or LAYM do it. We all die and feed worms. Just understand the consequences of your actions. Or dont
Unfortunately, people doing whatever makes them happy does, indeed, impact others. For example, motorcyclists who insist on riding without a helmet get hurt, file insurance claims, and cause everyones insurance premiums to rise. If the majority of people are fools (I won't argue THAT point), then the minority of non-fools(?!) are also impacted. This is all the downside of being a part of the "group" we call society.

Mankind has so much potential that is squandered. On the other hand, maybe all of that potential is just an illusion.
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Old 03-20-2009, 07:45 AM   #5
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I dunno. You tell me: Is it better to have spent the money I lost in my investments and still hav stuff (motorcycles, boats, snowmobiles, electronics, cars, houses, planes) and experiences (vacations, concerts, restaurant meals) or to have the money simply go "poof".

Poof is not an experience and leaves nothing behind.
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Old 03-20-2009, 07:59 AM   #6
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I dunno. You tell me: Is it better to have spent the money I lost in my investments and still hav stuff (motorcycles, boats, snowmobiles, electronics, cars, houses, planes) and experiences (vacations, concerts, restaurant meals) or to have the money simply go "poof".

Poof is not an experience and leaves nothing behind.
How about the in between option - balance.

Save and invest for your future needs and prudently enjoy the fruits of your labors along the way.
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Old 03-20-2009, 08:04 AM   #7
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I'll go with Dex's answer. Save reasonably and spend on the things that matter now.

I've seen a lot of friends in just the same situ as Culture's buddy. And a couple of them have lost their jobs--very sad.
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Old 03-20-2009, 08:13 AM   #8
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Yup, Dex said it.
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Old 03-20-2009, 08:33 AM   #9
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I LBYM. No one ever said that it had to be all sack cloth and ashes. It is about not over reaching, not stretching to achieve a life style that your dollars cannot support with out taking on unnecessary debt. It becomes a way of life to the point that you do not know your doing it really. It is just the way you live. It should not be painful, you should not feel deprived. If it is that way then you are too tight with your money IMO and should loosen up a bit.

Balance.......yes.
Knowing what enough is.......yes.
Not throwing LBYM up in every ones face....appreciated.
Accepting that not every one is going to live this way...being realistic.
One of the reasons I am not going crazy now is because I am confident that my husband and I will ride this economic upheaval out just fine. We got this way because we did not do so well in the past and got our acts together. Nothing like having your life blown to smithereens to teach you a thing or two about preparing for the worse.
Some folks will get religion during and after the current "interesting times". Some won't get it at all and will have to be bailed out. Nothing new there. Thats life and it is not fair. I'm just happy to be sleeping well and not worrying if things are going to be OK going forward. That is what LBYM gets you and thats enough.
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Old 03-20-2009, 08:43 AM   #10
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One of the things I've noticed is that some of those who become obsessed with LBYM to the maximum extent possible exhibit many of the same behaviors as the "Keep up with the Joneses" types. Only instead of competing with and judging others by how much stuff they have, the competition and judging is based on how cheap you can be. I call it a "cheaper than thou" mentality.

Neither, IMO, is any way to live. There could be people who have, say, $2000 a month in discretionary income and if they blow $500 on something they really enjoy once in a while and save "only" $1500 of it, some of the LAFAPBYM (Live As Far As Possible Below Your Means) types will chide them for being wasteful, reckless spenders and act like they are "lnferior" in some sense because they don't save every single dollar they possibly can.

More than ever (at least in my lifetime), it does seem important to put a lot away for the future. That's especially true for people who don't have job security and for those who are mostly living off of interest and investments. But there's still a balance to be struck. We don't KNOW we'll be around for the future we're diligently (and in some cases, almost obsessively) saving for.

So to me it makes some sense to do some amount of living for today. I've heard too many horror stories about people who live deprivation-style lives in order to secure their future, and then they pass before they make it there. So I see it all as a matter of prioritization -- look at your budgets, look at your potential discretionary income (after all usual expenses, bills, taxes and budgeted savings and investments) -- and decide what "luxuries" are most important to you and your current enjoyment of life. And have fun with some of those things, but defer some of the lesser things, often the $5 here/$10 there stuff that adds up to hundreds in a month.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-20-2009, 08:58 AM   #11
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Good post ziggy29. There are purists in every group. They are usually insufferable bores and should be avoided at all cost.
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Old 03-20-2009, 09:21 AM   #12
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So I see it all as a matter of prioritization -- look at your budgets, look at your potential discretionary income (after all usual expenses, bills, taxes and budgeted savings and investments) -- and decide what "luxuries" are most important to you and your current enjoyment of life. And have fun with some of those things, but defer some of the lesser things, often the $5 here/$10 there stuff that adds up to hundreds in a month.
Well, yes - - and then don't complain that you can't live on less! These decisions are OURS to make, and so are our prioritizations.

Any/all of us can, and IMO should:

(1) make conscious decisions on how much we are going to spend,
(2) prioritize our expenditures, and then
(3) figure out what to include and what to cut so that we reach our spending goals.

So many people just moan and groan that they simply CAN'T live on less than a certain dollar figure. If that figure is over the poverty level, and if they have decided that they need to spend less, then I can't see it and it seems like a childish justification for spending more than allotted.
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Old 03-20-2009, 09:26 AM   #13
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At what point would you consider LBYM too extreme?

I LBYM. IMO, it's ok to LBYM if you are missing out on stuff but not experiences. Sure, I could go out and buy a new car but in the long run it's not going to make me happier. On the other hand my wife and I paid for our wedding last year and although it was much more $ than what we wanted to spend, it was worth every penny.

I don't really have a problem with either one. I guess if you pack a lunch to work everyday just because you don't want to spend $10 on lunch than that's a little extreme.
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Old 03-20-2009, 09:29 AM   #14
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We certainly practiced LBYM when we were younger and raising a family (so the kids could practice LABY:-) I can probably count on the fingers of one hand the real vacations we had -- every other trip was to see family or take care of something or other. Now that we're retired, the last thing I want to do is to keep LBYM. We want to take advantage now of everything we sacrificed for. Not that we're big spenders, we never developed that personality. But, if we have the money to spend on a vacation, on a hobby, or whatever, we spend it. As LOL said, that's better than to have it go poof. Besides, if we really believe our spreadsheets, and if we stay within our SWR, then we should be fine.
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Old 03-20-2009, 09:34 AM   #15
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I don't really have a problem with either one. I guess if you pack a lunch to work everyday just because you don't want to spend $10 on lunch than that's a little extreme.
To me that depends on how much enjoyment you derive out of spending $10 for lunch and how easily you can afford it (and, to some degree, how often you do it.) If you can well afford going out to lunch every day and it adds a lot of enjoyment to your life, go for it.

But maybe it doesn't add much to your quality of life, and maybe you'd rather save that $200 a month or there are other discretionary things and/or activities you'd rather spend it on when your discretionary budget is limited. In that case it makese sense to "brown bag" it, at least most of the time.

The bottom line is that we all have different "means," goals and priorities with respect to enjoyment of life in the here and now. And to some degree, suggestions of how people should handle their discretionary income is very much projecting.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-20-2009, 09:41 AM   #16
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At what point would you consider LBYM too extreme?

I LBYM. IMO, it's ok to LBYM if you are missing out on stuff but not experiences. Sure, I could go out and buy a new car but in the long run it's not going to make me happier. On the other hand my wife and I paid for our wedding last year and although it was much more $ than what we wanted to spend, it was worth every penny.

I don't really have a problem with either one. I guess if you pack a lunch to work everyday just because you don't want to spend $10 on lunch than that's a little extreme.
But that is according to your priorities, not necessarily anyone else's.

Personally, I felt like my humungous 1975 wedding was a huge waste of money. I agreed to it because it was my mother's dream, not mine. I still could care less whether I had it or not because I felt that marriage is in the soul and heart, and has nothing to do with 350 guests that you don't even know. But my priorities are not yours.

Also, I pack a lunch for work every day because I don't want to spend $5 on lunch; your priorities would say this is extreme, but mine don't. I bring healthier food from home than I would otherwise buy, and save a little bit. Since I live alone, I also have a habit of never having more than one light on in the house. Some people might think that was unconscionably cheap.

Someone else's priorities might say that I should not have spent the money to buy my Wii last summer, but it has been such fun and makes me feel privileged, too. Again, my priorities but not theirs.
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Old 03-20-2009, 09:46 AM   #17
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I thought the idea was to maximize the enjoyment of your resources. Wouldn't this suggest the smooth and constant expenditure of resources?

Save to much and you miss out on experiences while your young.

Save to little and your golden years are not so golden.
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Old 03-20-2009, 09:49 AM   #18
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Save to much and you miss out on experiences while your young.

Save to little and your golden years are not so golden.
Exactly right, IMO. Provide for your future but don't neglect the present.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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Old 03-20-2009, 09:56 AM   #19
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But that is according to your priorities, not necessarily anyone else's.

Personally, I felt like my humungous 1975 wedding was a huge waste of money. I agreed to it because it was my mother's dream, not mine. I still could care less whether I had it or not because I felt that marriage is in the soul and heart, and has nothing to do with 350 guests that you don't even know. But my priorities are not yours.

Also, I pack a lunch for work every day because I don't want to spend $5 on lunch; your priorities would say this is extreme, but mine don't. I bring healthier food from home than I would otherwise buy, and save a little bit. Since I live alone, I also have a habit of never having more than one light on in the house. Some people might think that was unconscionably cheap.

Someone else's priorities might say that I should not have spent the money to buy my Wii last summer, but it has been such fun and makes me feel privileged, too. Again, my priorities but not theirs.
Very insightful. I would say that you are at a point in your life where you place a high value on retirement.

This makes sense. At 24, I often spend $5 without giving it much thought because life has the appearence of offering endless resources (so much working capital remaining that can be converted into wealth). On the other hand, you view any resource as a valuable commodity because you have decided that you no longer wish to use your time (working capital) to chase those resources.

Is funny how time changes one's perceptions.

BTW; Your "retirement ticker" has me counting the days. We will have to throw you a "party" (read congratulatory thread) or something when the big day comes.
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Old 03-20-2009, 10:11 AM   #20
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Very insightful. I would say that you are at a point in your life where you place a high value on retirement.

This makes sense. At 24, I often spend $5 without giving it much thought because life has the appearence of offering endless resources (so much working capital remaining that can be converted into wealth). On the other hand, you view any resource as a valuable commodity because you have decided that you no longer wish to use your time (working capital) to chase those resources.

Is funny how time changes one's perceptions.
When I was younger, I did not think about spending $5 either, I admit! But if I had saved it and invested it, I probably wouldn't be working at age 60 as I am right now. Which, as you might imagine, is no picnic for some of us. (Did you see American Idol this week? Much to my surprise, I found out that Randy Travis is only 49 years old. Wow. He looks aged - - as old as I feel, sometimes.)

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BTW; Your "retirement ticker" has me counting the days. We will have to throw you a "party" (read congratulatory thread) or something when the big day comes.
Thanks! I haven't yet "put in my papers", so I don't yet have HR's blessing on all of this, but I am pretty sure that the date I computed is the correct date. I'll know in a couple of months.
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