If your debt free today, you can probably say, “Recession, there’s a recession going on?”

To me, Living within your means refers to the fact that my monthly income is greater than my monthly expenses. By how much is really based on the individual. Expenses include everything, paying off loans, food, shelter, clothing, entertainment, utilities, etc. Anything you have to pay is considered an expense. If you sum all those up and it’s still below what you’re making every month, you’re living within your means.

Just like with mortgage and student loans, you have an expectation of what you’ll be making and what your monthly income is. The moment that your income drops a significant chunk, you monthly income will probably be less than your monthly expenses, which is never a good thing.

As many of you agree, mortgage isn’t a bad thing, but the moment you can’t pay the monthly mortgage, you are living outside your means and one of the options is to sell the house and find something cheaper. But before then, you are living well within your means.

It’s the same with a car loan, or any loan you make to buy something. If you can expect to have a net increase of money at the end of the month, I can’t see how you would argue that’s living outside your means.

However, living withing your means doesn’t mean you aren’t living stupidly within your means. One of them is borrowing from your credit card or high interest rate loans. While still living within your means, you’re just wasting money at that point.

Sure you can save up money to buy stuff, but unfortunately humans can’t live forever. How long do you have to save up to go to the college you desire, especially if you plan on going to grad, law, or medical school? How long do you have to save up before you can buy your first house?

Some of you may think that my definition would allow borrowing at 0% interest for the awhile and then pay back later. I would just like to assert the fact that my definition wouldn’t allow that unless when the interest starts kicking in, you’re still able to maintain a monthly higher income than expenses.

sad, but so true. in my life it has always been the things that i am “irrational” or “romantic” about that have caused me to rack up the debt: maintaining my tumultuous long distance relationship with plane tickets i can’t afford or fixing that piece of broken musical equipment i feel i need to keep following my muse….
with everything else, i only spend money if i actually have money.

so, in other words, as modest mouse would say, “heart cooks brain”….

Others might argue that you need to finance your car, but i disagree. I pay cash, although i drive nothing fancieer than a honda.

@Laura – Exactly control what you can have control off well and leave the rest.

@Chris – Destroying debt really does change your perspective on what money is worth.

@Money Theory – I agree, in tough times principles rather than fads gain strength.

@money-attraction – I think the definition is spot on, but we can definitely explore whether there are times when it is worth living outside your means.

@Surviving – I am not sure that borrow money is living within your means, I suspect if you had the cash stashed away to pay it off and you still wanted to borrow you could make a case. With that said there is room for discussion when borrowing might make some fiscal sense. We did the same for our condo. Our principle + taxes + interest + association fees is exactly the same as an apartment.

@Emma – I think that is some good advice. Thinking about lean or rough times helps to clarify whether it is something you can afford or something that will eventually crush you.

@Mike King – I suspect you are right. If people had emergency funds and control of spending we would need to have these conversations a lot less.