Corey Stokes

Growing up, adults told us we needed to live within our means. But, unfortunately, you don’t hear that much today. Although you still have those who tell you that the way to build a successful financial portfolio is to live on less than you make, much of the general advice tells you to manage your credit and debt. Yet, despite the trillions of dollars in debt that news outlets discuss, managing credit is still the upfront advice.

When I was in school, I learned how to manage a checkbook. For those who don’t know what that is, the checkbook register details the manually entered transactions made over a period. This was how the holder knew the balance in their bank account. Teachers taught how to use and balance these registers. Today, not only are checkbooks less prevalent, but learning how to manage the money in your bank account has taken a back seat to debt management.

Today’s financial courses teach using credit wisely instead of teaching how to budget correctly, save for what you want, and to live within your means. The dominant teaching is so focused on credit and debt-focused that the widespread belief is that living within your means is believed to mean the ability to afford the monthly payments. Making payments is the exact definition of an inability to afford whatever is being purchased. So, let’s define what is meant by the phrase live within your means: Your ability to pay for and maintain your lifestyle solely using the income you generate. Here’s what I mean.

Suppose you earn an income of $3000 per month. To live within your means, your monthly expenses are $3000 or less. This includes living expenses (your four walls – rent/mortgage, transportation, food, and utilities), Medical needs, entertainment, savings for the future, and any other expense that may arise—if you can pay for it within your $3000 per month income. Then you are living within your means.

This, however, is not popular teaching. Popular teaching promotes the buy now/pay later mentality that living within your means may not allow. Using credit is the dominant method of purchasing. But simply managing its use doesn’t go far enough to properly educate users on how to use it as a tool rather than a way to supplement their income. In other words, a $3000 monthly income and a $10,000 credit limit do not equate to having $13000 to spend. Moreover, the credit card payment of $100 does not mean you are still within your means.

While I won’t argue that the financial education I received as a child is superior to what is being taught today, I will say that what is being taught needs to be updated.  It must be updated for the changes we’ve seen over the decades. The message, however, does not need to change. Even though we’ve traded the checkbook register for the banking mobile app, the beginning point for financial education should teach the concepts of budgeting, saving, and spending. 

Teaching budgeting shows the concept of living within your means and is the building block for all other financial decisions a person will make. Starting with a budget and how to prepare one properly keeps the idea of not overspending front and center.  A correctly created budget will help answer the questions of how much I have to save and how much I have to spend.

Believe it or not, saving is not taught. I was told to save but not taught how to save or what it meant to save.  As a result, my saving account served as another spending account that I dipped into regularly to supplement my overspending—teaching the difference between saving for a specific purchase and simply building a savings account helped to drive home the concepts of budgeting and spending.

You would think spending would be easy, but it’s really not.  Today, we hand children bank cards, send them to the store, and expect them to know what to do.  But how would they know? How would they know that the bank card is tied to the balance in their bank account unless they are taught? How would they know that checking the prince on an item before paying for it is essential?  These lessons help to drive home the points of saving and budgeting, effectively teaching how to live within your means.

So, why is this important?  We are marketed to even before we can develop the idea that things cost money. Everywhere we look or turn, something sells us a product or service. The first bit of education we receive about money tells us to manage our credit and debt.  That is the wrong message for a society concerned with a debt problem.

The debt problem, although related, is a topic for another discussion. But it adds to this conversation about what it means to live within one means. In fact, the discussion of living on less than you make leads the conversation toward possible solutions. But, in the meantime, instead of teaching the ability to manage money and spend only what you earn, the current education teaches to control and manage what is spent using credit and debt.  And that is what needs to change. 

Financial education must be updated to prioritize budgeting, saving, and spending, rather than just managing credit and debt. Living within your means should be defined as being able to pay for and maintain your lifestyle solely using the income you generate. It’s important to teach financial concepts to children, including how to budget, save, and spend, to avoid overspending and to understand the value of money. The message needs to change to address the changes we’ve seen over the decades and focus on the foundational concepts that will help people make sound financial decisions. By teaching these concepts, we can help combat the societal issue of overspending and debt.

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