Living within your means is only an illusion

Question: My wife and I bought a new house last year and spent more than we had planned. Expenses that go along with it are also a bit more than expected. We are still living within our means, but we can’t save anything right now. But we’re not going into debt or anything. Are we OK to be where we are for a while?

Answer: No.

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

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 off.

But life isn’t like that at all, is it? After all, you were planning to buy your new home for one price, but by your own description, you ended up spending more than you had planned.

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.

Spending too much in the first 20 days of the month is nothing more than robbing the last 10 days of the month.

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. Like the pizza delivery boy showing up while you’re still in the shower, it’s just bad timing.

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 the 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 R. Moore, CFP® is managing director / planning group of Argent Advisors, Inc. Email him at bmoore@argentadvisors.com . Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at 251-5800.