Conventional wisdom advises that, to the best of our ability, we should strive to live within our means. What conventional wisdom fails to do is define what that actually means in practical terms. If you bring home $4,000 per month, how much should you apply to a mortgage payment? No one can answer that. Though finance companies try. But their goal is not for you to live your life to the fullest. It is for you to spend as much as possible, and still be able to make the monthly payments on time, for the next thirty years.
Some companies insist that you must earn three times the amount you spend on mortgage or rent. Others insist on four times the amount. Both figures feel somewhat arbitrary. Some people could live perfectly well on half. While others require twice the recommended income. What most people seem to do is buy the most house they think they can afford. My advice is to buy the least house in which you can comfortably live. Rather than living within your means, try living below your means. Here’s why:
The Real Action Is in the City, Not in the House
When going on a cruise, some people spend way too much money on the cabin, as if that is where they plan to be for a significant portion of their waking hours. If money is an object, that is a rookie mistake. You didn’t go on the cruise for the sleeping quarters. You went for the excitement and adventure of seeing new places and doing interesting things, almost none of which are in the cabin. Save your money for the good stuff.
If you are lucky enough to live in Cincinnati, Ohio, you find yourself in one of the greatest cities in the country. It has beenincluded, but not limited to the following categories:
- Best places to live
- Safest city
- Best walking city
- Top fun city
- Most social city
- Superior healthcare
- Top city for young people
- Most affordable
The last thing you want to do is spend all your available resources on your living quarters in a city like that. You want to reserve as much of your income as you can for being out and about, doing and seeing and living.
Most real estate agents will steer you towards the most expensive home they think you can afford. After all, the more you spend, the more they make. Do your own homework. Check out all the Cincinnati real estate listings in the area of your choice. Assess all the MLS results plotted on a Google map and do your due diligence.
When you take control of your house buying experience, you can save money for what is truly important.
We Have Not Seen the Last Economic Downturn
We have just gone through a. This is the second recession many of us have lived through. Had the bursting of the tech bubble effected more people, that might have been the beginning of a recession.
The point is not to frighten you with a bunch of fear, uncertainty, and doubt. It is to remind you that bad things happen to good economies. And we are not exactly in a good economy. When economic downturns happen, most people are not prepared for them. They have no idea what is about to hit. Buying a home below your means gives you the cushion to still be within your means when the next downturn hits.
Savings and Investments Become a Realistic Option
Finally, one of the most common reasons people do not have a savings or investment account is because they are living within their means, exactly within their means. There is simply no room for anything else. By living below your means, you free up that money for options like savings and investment accounts that would have, otherwise, been out of reach.
Save money. It might come in handy in the next economic downturn. Regardless, you will be able to continue to enjoy all of the amenities of your fine city. All of this is made possible by living comfortably below your means.