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Living Within Your Means Is An Illusion

401(K) 2012

Living within your means is an illusion, and when you are awakened from your dream, it will be too late.

Most of us have the idea that if we are living within our means, we’re OK, even if it means we can’t save anything right now. You’re not racking up debt, but you’re also not saving. Is that OK for a while?


If life was a straight line of experiences and expenses, each one following predictably after the other exactly as planned, you might be able to pull this “living barely within your means” thing off.

But life isn’t like that at all, is it? How many times have I heard the story of the couple planning to buy or build their new home for one price, only to spend more – much more -- than they had planned.

Can you say, “change order?”

Suppose you came to me and said, “I make $5,000 per month. And we don’t overspend… until the 20th of every month. Then we run out of money.” Anyone with common sense would understand that you are indeed overspending from the first of the month until the 20th… the very reason why you run out on the 20th.

Just because the consequences of your overspending do not show up until later does not mean you are not overspending now. You are.

The same is true for your life. The average person has a career that spans 40 years. Most of us will spend many years, decades perhaps, not working or at least not working much. Actuarial tables tell us that a 65-year-old couple can expect at least one of them to survive into their 90s.

So, every year you simply “live within your means,” not saving anything, is a year you are robbing your tomorrow.

It may show up in the form of an unexpected emergency. In fact, you should expect the emergency, so perhaps we should call it an unscheduled emergency.

Or it may be a retirement that is grossly underfunded. You may think that just means you’ll have to work a year or two more. Probably a lot more.

But what if you can’t? Do you have some written guarantee from God that you’re going to be healthy enough to work well into your 70s? Do you know a lot of people still working in their primary professions into their 70s? Any?

If health or other circumstances force you to retire before you are financially prepared, you will reap the full consequences of “living within your means” now. You’ll be locked into a lifestyle well below what you are used to. The effect is that you will be less free to go and do the things you want to do. Your life will not be what you want it to be.

Here’s the bottom line: if you are not saving 10% to 15% of your gross annual income now, you are robbing your tomorrows.

I don’t know when it will show up, but I’d bet it won’t be at the most convenient time.

Every year you put off the remedy, the price tag gets higher.

Wake up from your dream before it becomes a nightmare.

Start now. Save first. Stop robbing your future self.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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