Finance

Disclaimer: This may be inflammatory to some and borderline hypocritical at times. We’re not trying to tell you what we try to do is the right way to handle your money. It’s just another opinion piece you can choose to read (or don’t) for another viewpoint on finance. That said…

Living within your means is wildly underrated.

Our culture has us programmed to chase greatness, whatever that may be. Set whatever parameters you want: six figure income, 3000 square foot house, white picket fence, two cars in the driveway that are less than three years old, and don’t forget the new TV/Phone/Watch you just financed because the newest model just came out. Sure, the old one worked fine, but the new one is that much better. While we finance our lives away chasing said greatness, are we any better off?

Another option: Pay off everything as quickly as you can. Rock that flip-phone for as long as possible because it still works. Well maybe that’s a little excessive… How about that IPhone 6 instead of the 12 Pro Platinum Premium Plus that you can’t fit in your pocket? Drive that vehicle into the ground (keeping up on maintenance if course). Downsize to a smaller, more efficient house that you can pay off in half the time. Donate all the crap that you’ve accumulated just because you had the extra storage space in the bigger house. Fast forward a decade, and your debt-free life will be infinitely more rewarding than the paycheck to paycheck “millionaire” next door.

The goal should be enough, not more. Studies have shown there is a specific annual income that we should really be viewing as greatness.  This figure will vary depending on where you live and the number of dependents you have, but for general discussion, it’s about $85,000 per year (figure adjusted for inflation since the article was written). To summarize, there are legitimate money problems that come with a lower income household, even if you budget correctly.  If you’re unable to easily put food on the table, pay the rent or mortgage, and take care of your health and well being, unhappiness is sure to follow.  On the other end of the spectrum, the law of diminishing returns has a nasty catch once you cross into the six-figures; you’re statistically less happy or fulfilled than someone in a lower income bracket.  For reference, see the Joneses that live in the McMansion in the burbs.  To stereotype, there’s a good chance the adults are unhappy with their jobs, chasing that big paycheck, just to make the payment on the luxury car parked in the driveway and the new inground pool they had installed last year.  The house creates even more separation among family members.  Nobody goes in the second dining room and the commercial kitchen is rarely used (we work too hard, no time to cook a heathy meal) and everyone’s free time is spent staring at their screens.  The result: a mentally and physically unhealthy family with entitled children who are destined to be the next Chad’s or Karen’s of their generation. I’m clearing stereotyping here and don’t mean to offend anyone. That said, if you take a look around, this type of life is probably more prevalent than many realize.

Or goal is… enough.  We drive older vehicles, but they get us where we need to go.  We have older phones, but they still make calls.  Our shoes still keep our feet comfortable and dry.  We can put healthy meals on the table.  We routinely squirrel away money for future senior diaper changes (see “dinks”).  We can still splurge if we want to, but we always think long and hard to make sure it’s a purchase with a tangible reward (fills a need or gives us X amount of joy).  In our minds, anything more than the basics is excess.