What does it mean today to 'live within your means'? That was the question posed by Megan of The Happiest Mom during a #MomTalksMoney video chat we held in late July. She has a point.
For our parents and grandparents, it meant only spending what you earned -- hopefully leaving some financial "wiggle room" for unexpected events like a leaky roof. But as we added credit cards to our wallet, the notion of "living within your means" somehow morphed into "living within your available credit limit" -- at least for some. To regain their financial footing after the Great Recession, many families have returned to the "retro" definition.
Considering the precarious state of our economy, is living within our means good enough? Should we be aiming to live beneath our means, rather than within them? That's the question I, in turn, posed to seven money gurus in my network. "Yes," each enthusiastically exclaimed, and then shared with me their tips for what it takes to live a prudent but fulfilling life:
1. Think of your "means" as a pie, with slices allocated to your mortgage, education, savings, credit card debt, etc. If one slice grows, you have to reduce the other pieces to stay whole.
2. Keep fixed expenses -- mortgage or rent payments, car payments, utilities, insurance premiums, groceries, etc. -- to 50% or less of pre-tax income.
3. Strive to save at least 20% of your after-tax income.
4. With the exception of your home and education, pay cash or don't buy it.
5. Keep your overhead low and stockpile cash for living: save to spend.
6. Be intentional in how you use your money -- spend less on "stuff" and more on what's important.
7. Drop the financial baggage when talking to your kids about money.
For even more smart, actionable advice on living within your means, check out my full article, "7 Expert Tips on How to Live within Your Means Now."
How do you balance your financial needs and wants? What's your benchmark for gauging whether you are living within -- or beneath -- your means?
Women & Co. is a service of Citibank, N.A., that provides financial content, commentary and related resources intended for informational purposes only. The views expressed in Women & Co. content constitute the judgment of the author(s) as of the publication date and are subject to change without notice. Women & Co. makes no guarantee about the accuracy of information provided by any third party. Women and Company, Women & Co., Citibank, Citi, and Citi with Arc Design are registered service marks of Citigroup Inc.
Citigroup Inc. and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
INVESTMENT PRODUCTS: NOT FDIC INSURED · NO BANK GUARANTEE · MAY LOSE VALUE