To think most people I know live anove their means?

[PrincessBananaH]

I just came across a statement that really got me thinking which is that, essentially, you should always live below your means in order to be financially secure. It’s a pretty simple statement but I don’t think many of us follow this in life. Most people I know are trying to keep up with the Jones, stretching their mortgages to almost unafforable amounts to buy bigger houses instead of being happy in a modest home, going on lots of holidays and dinners out etc.
I am trying hard to save currently and with lots of family expenses and childcare I often think we’d be better off living below our means in the future years to keep building more financial stability, however I find it hard when everyone around us is trying to “have it all”.
AIBU to think most people don’t want to live below their means?

I think it’s easier to think that your colleagues are living above their means because they are going on several holidays per year and getting a new Mercedes SUV. It makes us feel better about ourselves to think that they must be getting in to loads of debt, but we don’t have those things because we are being more sensible. Pat self on back. Quite simply they are likely just richer than you - maybe they have a high earning partner, received money from family, their mortgage payments might be much lower than yours, leaving them more spending money. Living above your means can only last for a few years……… if they are consistently spending more money than you, they probably have more money than you.

Everyone I know closely live within or below their means. However, from the outside looking in it might not seem that way as they might have had family support to buy a big house or inheritances from childhood etc. I think millennials are probably the most divided in terms of wealth between the double income, no children households whether renting or home owners, they'll be richer than those millennials with young children in childcare. Then they'll be differences in interest rate effects on mortgages for example those in long term fixed rate low mortgages and those that have been stung by the hikes in interest also more sharply felt if the mortgage was high to begin with. I feel we are incredibly sensible and dare I say boring but any huge advances in saving are slow in coming

£20k for a holiday? On credit cards? How long would that take to pay off? And what if you suddenly lost one income before it was paid off?

My sister is one of them.

Last year went to New York, Barbados and Paris. Must have cost £15k at least. Also got a brand new car. Mortgage debt about £150k and personal debt about £100k. She doesn’t worry about it.

Wages are too low.

We had our mortgage with Nationwide because they didn't base it on salary but on your income versus outgoings. We had two lots of people come back to us to confirm that we didn't have credit card debt, store card debt or car payments. Obviously we'd worked hard to be in a good place to get a mortgage and so our only real outgoings were rent (including bills) and food.

I think many just rack up debts and live with a permanent overdraft. It's so easy to get credit for purchases and the zero interest for twelve months or whatever ones - people don't realise they're accruing interest in those twelve months so one late payment and you're stuck with paying a stupid price for something. So many treading water it scares me. And the stupid thing is, this page has taught me that it doesn't matter if someone is earning £30K or £100K, people don't know how to only spend what they have.

That isn't to say there aren't also the people who are seriously struggling due to inflation and terrible wages - ironically they're often the ones with the most money sense.

Reading that gives me anxiety 😥

I think @HarrietStyles is correct, but many won’t want to believe it…

@PrincessBananaH I am trying hard to save currently and with lots of family expenses and childcare I often think we’d be better off living below our means in the future years to keep building more financial stability, however I find it hard when everyone around us is trying to “have it all”.
So you find it hard because everyone else^^ is trying to keep up with the joneses? Can you not see the irony of your statement? You are struggling because everyone else is spending so you find it hard to save. Beggars belief that you think somehow everyone else is at fault when you are influenced by others spending just as much as they are.

One of the nice things about WFH is that there is a lot less chit chat about cars, holidays etc.

If you work in a place where there is a lot of this sort of chat going on then it can be quite hard to take a different course.

We live below our means and always have. Technically we could have afforded bigger houses, cars and holidays than we went on. We could have afforded to do more to the house.

Financial security is priceless to me. It's my main concern. I couldn't give a flying f**k about the Joneses.

Interesting observation. I mainly wfh and have done since lockdown and do feel a lot less bothered these days about fashion, cars, eating out etc and I do wonder if there's a correlation. I work in finance where there is a reasonable amount of money swishing about and lots of Jones's.

It’s always interesting to read these threads. At the minute we’re definitely living above our means

in my early 20s I made some questionable life choices with ex partners (buying cars in my name with one and taking on the bills with another when he got made redundant and pretty much fully supporting one with 4 kids where I paid for everything for 3 days a week). Back then I had a better paid job and looking back now I honestly wish I hadn’t.

when I’d broken up with the last one I decided to fully throw myself into work but soon after met my now DH. In the last 7 years we’ve had 2 house moves (the second one to the house that Jack built) and 2 DC and to have the flexibility I’ve dropped my hours.

my level of debt has never changed because of our circumstances but we currently have to use the money we pay off credit cards to pay towards other bills. Or we have to “save” on credit cards.

im hoping this year with minimum wage going up and DC childcare bill dropping by 1/3 it will put us in a better position. We still enjoy our days out as we don’t get much time together as a family and we still book one camping trip and one other holiday. Although we have just been quoted 5K for the next lot of house repairs so I think it’s another year of living beyond of means but hopefully ending the year in a better financial position than we started!

I think because we’re used to the same amount of debt it’s just stayed that way

I guess the good thing growing up in Eastern Europe was that there were no credit cards or loans to buy stuff. You had no option but live within your means. Which was easy because there wasn’t all that much you wanted to buy anyway, housing was almost free and you couldn’t travel far either.

I too work on finance.

In my previous organisation I think there was quite a lot of pressure on juniors to 'look the part'. Lots of chat about cars. A lot of people received a car allowance (nature of role) and were expected to use all of it and more to get the 'best' car.

Also a lot of chat about holidays - high end AI, exotic places. Self catering and camping were anathema.

If you are immersed in this atmosphere it is easy to lose track of 'normal'.

In my current organisation, despite salaries being a lot higher, there is no chat about spending.

I live below. I live in a HA property. No credit cards or loans. Cars I buy second hand outright. I'm am paying into an iva which will be cleared next year. The debt was from years ago when I was going through a breakdown and not paying my bills.

I see lots of people that live beyond their means and it just shows how insecure they are and materialistic. If you can't buy it outright you shouldn't have it simple as that. Buying "stuff" on credit is a fools game.

I live under my means now and my life is so much better as a result compared to when I was in my 20s and 30s when I was running up credit and overdraft debt. I've never had a family to help me, so some of that debt was unavoidable (rent and food) but I cringe when I look back on the crap I bought just to feel better (expensive clothes and DVDs). I think I was indirectly influenced by my mum as she always had a loan on the go and spent most of her disposable income on home improvements, probably to make her feel better about her unhappy marriage. I used credit cards again a few years ago to support my studies and part-time work, but they're paid off and now I do regular overtime (in health and social care) to build up my savings, although I do have student loan debt.

I think it's Dave Ramsey who says your income is your biggest way to increase wealth. So far, I only have £5K saved, which is small fry to many people on here and on the Money Matters board, but having that little bit of security - seven months of living expenses - massively helps my wellbeing. I'm not interested in expensive clothes, cars, far flung holidays, and drinking often, so have very few outgoings and my low-ish rent is all-inclusive. I have worked - still do - to have a big gap between my outgoings and wages and prioritise savings and having regular mini-breaks.

Should have clarified, putting on a credit card (amex) for the points which can then be used to get business class flight vouchers. It gets paid off the next month. We have insurance for income protection so if one lost a job we would be fine and we both make enough to cover the bills alone should we absolutely need to. We also both have about 1 year salary in the bank. All I'm asking is what does living above your means actually mean? It can't just be taking out loans.

I suppose it can only be spending more on a monthly basis than you make, and if so, then that can really only work for a year, max, before it catches up to you. We do not do that we just spend lavishly BC we have minimal responsibility and both make good money, so why the fuck not?

How are people getting good credit ratings to be able to get a mortgage, if they aren't taking on any debt? The average earner and below have to take out credit, to get better credit in the future. As pp have pointed out they couldn't buy necessary things outright. Although I avoid the threads were people plead poverty on £100k a year, when what they've done is overstretched themselves. The recent thread were the poster thought that her inlaws were better off on £60k a year less than her and the replies were ridiculous. There's going to be a different attitude towards debt because as soon as teens from ordinary families hit 19 they have to get a loan to pay for their education.

Of course most people live above their means in this country. It's called credit.

Credit cards, getting a phone or contract, financing a car. The more extreme end is taking out loans to go on holidays or buy expensive gifts for kids or do a fancy home extension that may or may not pay off. Also getting a mortgage that is a scary big amount of their take home pay.

No savings, no rainy day fund, no proper private pension.

All this is living above your needs.

@RiderofRohan I don't agree that using credit is living above your means.

In modern society being able to manage credit: utilise interest free deals, pay off cheap credit, stick to regular payment plans without juggling are all examples of living within your means.

This is all person-specific.

I totally agree when it comes to credit cards- if they are paid off in full. However many people are living in debt because of credit. I read that almost half of people are using credit cards to afford day to day spending and missed payments are becoming much more common. Late fees and accruing interest are not living within your means.

Truth is many people are not credit card people but take them out because they are peddled a line about how they need to build their credit scores- only to end up in debt.

I'm not against credit. I have credit cards I pay off weekly, because I have the money for whatever I purchase in my bank. So I use the credit card to build up my credit score and get cashback, not to buy things I can't afford until my next pay check (or at all).

As for car loans or buying electronics on credit, this is living above your means. You pay more over time for something you can't afford today.

The only point of utilising interest free deals is if you are going to put that money aside in a high interest savings account to grow and then pay it off at the end of the interest free term. Not something most people do.

Nope. You'd be a bit daft to pay £700 for a phone when you could have paid it off at 0% interest months over 3 years and let the capital accrue interest. Lots of similar examples where credit can be used to your advantage to manage your personal cash flow. Not many people driving around in a £50k car actually withdrew that cash from the bank. They have a lease deal which means they can drive a nice car. As long as they can afford the monthly payments, that's living within their means.

My definition of living within your means is very simple - you have money left over every month after you’ve paid for everything. If you don’t have anything left and you have to or choose to go into debt, then you’re going above your means.