Blog | Personal Finance

Should You Live Below Your Means?

I don’t believe in the live-below-your-means mindset. It’s time to grow bigger, get smarter, and expand not only your means, but expand yourself as an individual as well.

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Why expanding your means is the key to a prosperous life

If you believe in the law of attraction, then you know that thoughts become things — your mind is such a powerful tool! If you think positive things, then you’ll be inviting more positivity into your world. And if your thoughts turn negative, then that’s the type of energy you’ll be surrounding yourself with.

Negative thoughts can come from within or the influence of others and both are equally determinantal. I believe they actually work together to create a vicious cycle — the more negative your thoughts, the more susceptible you are to being exposed to and believing other people’s negative thoughts.

For instance, if you think you have limitations in life, you’ll eventually believe in those limitations and they will hold you back. Similarly, if an outside influence, such as a so-called expert, plants a negative seed in your mind, you’re going to believe it to be true.

I see this happen time and time again, because we are fed countless lies every day, through the news, social media, and by our friends, neighbors, coworkers and even our Uber drivers. After you hear these negative (and often incorrect) messages over and over, it’s easy to start believing they are truths. Sadly, some of these lies can keep you from improving your life, trusting your gut, and may even keep you from achieving financial freedom.

What’s the most common lie financial experts tell?

One of the best examples of this is when your friends, parents, or financial “experts” advise people to “live below your means.” Just think about that notion rationally for a moment: it assumes the solution to your financial problems is to cut your expenses. How limiting is that belief? More importantly, it’s not even true. It’s an opinion versus a fact, and an ill-informed one at that.

Yet day after day, the financial “experts” utter that same advice: live below your means. Instead of just blindly accepting this advice, we should be asking, “Why do they say that?” and “Isn’t there a better way?”

Jean Chatzky, well-known financial author and speaker, uses the phrase, “Live modestly.” When asked why, she said, “Because 41 percent of people in the United States will run out of money during retirement.” This mentality goes back to assuming that people have to save their way to retirement, which is nearly impossible and entirely unrealistic.

Another assumption the “experts” make is that we don’t know how to control our spending. We want instant gratification. In other words, we are spending more than we are bringing in, so it must be our fault we can’t make ends meet. While this may be true to some degree for some portion of the population, it’s definitely not the case across the board.

The dangers of living above your means

A gentleman I know, Kevin, has lived above his means all his life. When he was younger, his income was high. He wined and dined beautiful women, drove the expensive sports cars, and lived near the ocean in Malibu. He lived a lavish lifestyle.

As he got older, however, he had one problem: His lifestyle continued, but his income did not. Everything he owned was leveraged, or financed, to the hilt. His credit cards were always maxed out. He would ask to borrow money from his friends in order to support his extravagant lifestyle. “It’s just a temporary setback,” he’d tell them.

But it wasn’t temporary. When it came to making money, he always went for the long shot, the big deal, the gamble. He lived well above his means. He just could not admit to himself that he was broke. He lived in an illusion for years. He refused to get a job. That was “beneath him,” in his mind.

Today, his beautiful home has been foreclosed. He, his wife, and three children are basically homeless, living in inexpensive motels and staying with family members. He is 65. What surprises me is that he still insists, “This is just temporary.” You probably know someone just like Kevin.

The benefits of expanding your means

So, if “live below your means” assumes the solution is to cut your expenses, and “live above your means” assumes that the money is just around the corner, then what’s the answer? The solution is simple: increase and expand your income.

Anybody can cut expenses. And anybody can hope and pray that money will come in. But it takes creativity, knowledge, and daring to grow your income—to expand your means through financial intelligence.

Robert and I have lived this way for decades. When there are things we want in life, we don’t say, “We can’t afford that.” Nor do we say, “Let’s just get it. The money will come.”

We instead say, “How can we afford that?” It’s a different mindset and an important one. This mindset has helped us to create wealth by purchasing assets that expand our means while also allowing us to enjoy the finer things in life.

Living to expand your means

Robert and I lived in a small house with a $400 mortgage for 10 years. During that same period in our lives, most of our friends had high-paying jobs and were driving the newest Porsches, Mercedes, and BMWs. They were taking the expensive international vacations to the trendiest hotspots around the world. They lived in the “McMansions.”

On the flip side, Robert and I were not exactly suffering. Our house, small and inexpensive, was in a lovely resort with a water park, shops, and restaurants. The restaurant would deliver room service to our front door on a golf cart. We traveled the world. The difference between our travel and our friends’ travel was that businesses paid us to travel to meet with them, while our friends paid their own way. We had a great lifestyle even though our expenses were low. We did all of this by design.

The money we could have spent on the big house and fancy cars went instead to buying our investments. At first, we invested primarily in rental real estate, using the tips I shared in my recent post, “How to get started in real estate.” Then we expanded our investments across all asset classes (learn about how to bring focus to the diversification of your portfolio). It was definitely a case of delayed gratification. We continued buying investments and living where we were until the day came when the cash flow, or monthly income, from our investments could pay for the big house and fancy cars.

Essentially, we did not live below or above our means — we lived to expand our means. Today, we still adhere to that strategy. We continue to increase our income and expand our means to create the lifestyle we want for ourselves.

How to expand your means

Now you know why I don’t subscribe to the mindset of “live below your means.” For many people, including those offering the advice, this is a permanently poor mindset. But even more damaging than the poor mindset is that this advice kills the spirit. It contracts you and makes you small. It makes a person less of who they are, not more. It sentences a person to a life of mediocrity.

If you ever thought that you had to spend the rest of your life living below your means, stop! It’s time to grow bigger, gain more financial knowledge, and expand not only your means, but expand yourself as an individual as well.

If you aren’t sure if real estate investing is for you, then that doesn’t mean you’re out of options. Remember how I said earlier that it takes creativity, knowledge, and daring to grow your income? How about pursuing a side hustle to bring more cash into your account? Another option would be to examine the pros and cons of investing in stocks to see if that’s the path for you.

Have you considered turning one of your passions into profits? In my book, "It's Rising Time!," I share a story about a woman who loved to spend money on designer handbags. With every extra dollar she had, she ran out and bought the latest Louis Vuitton, Prada, or Gucci handbag. Her friends and family would often ask if they could borrow one of her purses, and she would gladly agree. But it happened a lot! This experience led her to a bright insight, and she asked herself: “What if I rented out my handbags?” And that’s exactly what she did. Today, she has a successful accessories rental business online (and off) through which she rents handbags, shoes, and jewelry.

There are countless ways to expand your means to live the life you want — and where there’s a will, there’s a way. If you’re coming up short, consider these five questions to help discover why you aren’t rich yet — and see how changing your mindset will positively alter your life!

Original publish date: October 24, 2013

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