"Living below your means" in practice

Wednesday, September 16, 2009 |

Darn, another personal finance blogger talking about living below your mean? Why? Can't PF blogger move beyond this topic? I don't think any personal finance blogger should ever stop reminding their reader to live below your mean. That is the main principal of building wealth. But I think each personal finance blogger has different suggestion on how to spend less that you make. As I mentioned in my about page, I have a single income family. We have two daughters, 2.5 years and 2.5 months old. I work for the government. Yet, we have been able to pay off our mortgage and has no debt. Obviously, the main reason we reach this point is not because we make a lot of money either through our salary. It is surely not because of our investments since started investing around in 2001 and the stock market hasn't really been that great over the past 8 to 10 years. The main reason is through our frugal living. Here are things that help us reach this point.

  • First, I will admit we were both lucky to come out of college with no or minimal debt. We do not grow up in U.S. and we both came to U.S. for college. My parents paid for my undergraduate educations, including all living expenses. My wife parents paid for her undergraduate study and she worked her way through her master degree by being research assistant and frugal living. So, we started with a big advantage over a lot of people here.
  • While we started dating in college and married at end of 2002.During that time, obviously we have our own spending and savings. We actually lived in separately cities coming out of college. When we got married and start living together, we know that there will be a point when we will have kids and the possibilities that my wife would stay at home. Thus we made decision early on that we will live with only one income. The other income will go fully for savings. Think about how much savings you could make with that! We have savings with only my income and in addition to full after tax money from my wife salary, we have tons of potential savings. Remember with investments is TIME IS YOUR FRIEND. Now we are both in our early thirty and we can use the power of compounding to the full extend.
  • We did not buy more house that we need. We bought our house in early 2005, at the height of the housing market. Do we have any regret to buy during that time?  Well, to small extend, I would say may be.  The value of our house is probably at the same level now or even less than when we bought it. But we paid off our mortgages in 2007, thus we don't have to worry about it now. While we are looking at new house at a better school district (our school district is not good at all), we still have time as our first daughter will not start going to kindergarten for another three years. Even in the search for our new house, we are very careful not to be tempted by house that is more than what we need. We got listing from our realtor with houses that looks really nice and we really like, but we know we will not even consider looking at those houses because we don't want to purchase a house that more than what we need. Paul Williams from Provident Planning has an article on being content with your home. I think that is one key thing that we try to be: being content and grateful that we are bless with a home that we own.
  • We own two cars. My car is 10 years old and my wife's car is 9 years old. Even with having two kids, we have not upgraded our compact cars. We know eventually we will need to upgrade our cars. One of the car will be an AWD car, but we will not buy more car that we need. We will make sure we buy cars with good gas mileage and reliability. Paul Williams @ Provident Planning also has another great article on being content with your car.

Those above are just some samples of things we do to live below our means.  In the future, I will put more examples of how we live below our means.

The latest Carnival of Personal Finance hosted by Mary @ SimplyForties is up.  My post on the topic of trust is included.  Check it out here: SimplyForties: Carnival of Personal Finance: Live From Monticello!


Anonymous said...

Question: How did you manage to pay off your mortgage in 2 years? That seems like an awfully short period of time, especially considering you bought at the height of the real estate market.

Mr. Bee said...

Dear Anonymous:
We are frugal and we could actually buy the house and pay it off even before we purchased it. As I mentioned, even before we purchased the house, we lived on one income. So everything from my wife is going to saving. The house was purchased for about $145k. We are fortunate that my wife made a decent amount of money before she quit and "work full time" as caretaker at home with the kids. In addition, she had several stock options that we given to her when the market at the bottom. Those stock options ended up being a very good value when it was redeemed.

I think overall key is when we had two incomes, we put all of one income into savings as if we don't even have that income and live off one income and made sure we even have savings based on that one income, which we did. Now we live on one income, have two kids and we continue to build our savings. We are very frugal in our lifestyle, drive old cars (one is 10 years and another one is 11 years old) and keep low-maintenance lifestyle. We eat healthy and don't like to go out to eat, not because we can't afford it, but because we don't like the unhealthy food outside. We have not find a lot of good healthy options for outside food.

I hope that helps and let me know if you have more questions. I don't really maintain this blog that much anymore since I am pursuing my passion in photography, but I will continue to monitor comments on the blog and response as necessary.

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