The Difference Between Living Below and Within Your Means

We all know (or should) that living above your means for the long term is a recipe for financial disaster. Living above your means is spending more than you earn on a consistent basis. When you do it occasionally, as in the case of an emergency or a planned splurge, it’s not detrimental. However, it becomes detrimental when you do it consistently. Most of us know this and try to avoid it, with varying degrees of success.

There is some confusion, however, as to the difference between living within your means versus below your means. Many people assume that they are the same thing, but really they’re very different. I’ve heard many people claim that, “I’m living


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9 Responses to The Difference Between Living Below and Within Your Means

  1. Broken Arrow says:

    I like this article. I hope more people realize that, while it is well enough to live within means, it also means standing still. And that means not making any progress towards saving for a future. That’s dangerous if we neglect it for too long, even if we do live within our means.

    You can move forward in life if you’re still stuck in Neutral.

  2. Claire says:

    I would argue that saving for retirement and an emergency fund are just as important as paying your monthly bills and that if you’re able to pay your bills but not save, you’re still living above your means. Once you’ve saved a certain percentage (which is debatable, 10%? 15%? 20%?) and paid all your bills, if you have money left over, then you’re living below your means.

  3. Broken Arrow says:

    Oops, meant to say that you can NOT move forward in life if you’re still stuck in Neutral.

  4. Paula says:

    Great post! I was also confused about the difference between living WITHIN my means and living BELOW it. I always thought our family lived below our means because we didn’t have a lot of CC debt, don’t buy new cars, wait to buy things until we need them, etc. Then, around the holidays, my husband lost his job and we became a one income family, instead of two incomes. For reasons I won’t elaborate on, we can’t get unemployment to supplement our income, so we are totally dependent on my full time income. This means that most bills get paid on time, we have food on the table and are able to heat our home, but that’s about it. Saving has been put on the back burner for now until hubby can get a part time job (he is currently finishing up his bachelor’s degree in the hopes of getting a higher paying job at some point.)

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  6. Forest says:

    I don’t earn a whole lot of money right now, but I don’t generally spend a lot either. However I have a large debt that came about from lending to family… As I felt it wasn’t money I spent I allowed it to snowball for years and I was paying debt with debt (not living within or below my means) and this hit a breaking point recently…. Luckily I have a debt management plan in place now and it’s affordable. I am working hard now to live below my means and get an emergency fund built up first before I move onto other essentials like saving for retirement.

    Thanks for the great article.

  7. nic says:

    I think this is a great article. One thing I would like to point out however is that if you are always socking money away for the future, then the future is never there until you’re old (retirement). Remember that once you have lived below your means for a period of time and have a strong financial ground to live on, you can live within your means, spending what you make…since you now have something to fall back on.

  8. This is a great post. Living within your means is similar to living on the edge. One major unexpected expenes and…Poof!

  9. laura says:

    I don’t agree with your definition. Living within your means just means you don’t have much, if any, leftover money. But you can be fully funding your retirement account, etc., and have a fully funded emergency fund.

    The problem is that people are misusing the term “within their means”. If you’re not fully funding your retirement account and don’t have a fully funded emergency fund, you AREN’T living within your means. You are spending the money that should be going into these funds.

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