Buy what you need, not what you can. Living below your means sounds like a simple concept, but it’s one that can help you improve your financial picture. Apply this principal anytime you’re making a financial decision—spending, saving, and investing. It’s especially important to buy only what you need on big purchases, such as your home and car.
The popular phrase, “Keeping up with the Joneses” refers to the notion that individuals and families feel obligated to try to match their friends’ and neighbors’ lifestyles. That can be with flashy cars, fancy houses, or pricey salon visits. Here’s the thing—trying to keep up the appearance of having more money than you do isn’t good for you, your family, or the Joneses.
The Joneses want to appear to have more money than you. Maybe they do, or maybe they’re spending more money than they’re making and fueling themselves into debt. Forget the Joneses. Focus on your lifestyle. Focus on what you have to spend and what you need to save. Be an example for the Joneses by living below your means. Show them financial security is more important than flashy belongings and
When you get prequalified for a mortgage, you will likely be told a mortgage amount you qualify for. This number is not nearly as important as the price tag on a home that meets your needs. Just because you can pre-qualify for a $300,000 mortgage, doesn’t mean you won’t be happy in a $180,000 home. You might even be happier with a lower mortgage payment or shorter mortgage term. The Joneses may have a theater room in their home, but you’ll have the available income to save for your kids’ college or retire earlier. Living below your means helps your prioritize what’s important to you instead of letting money and material items control your life.