Live Below Your Means
Almost all financial expert give advise of to live below your means. In other words, spend less than your earn. If your monthly income is RM2000, you spend less than that amount each month. You don’t buy a 42” LCD TV which might cause around RM5000 or more by installment. This figure have exceed your income limit. A normal flat screen TV will be sufficient for watching. The stuff appear on the screen is exactly the same!
Live below your means definitely is a workable way to achieve financial freedom. You have extra money for saving and for investing in variety of investment. However, live below your means is a get-rich-slowly scheme. You build up your net worth cent by cent.
Frugal Living
If you spend more, you are in debt and this is mostly what people did, live beyond their means. All things are pay in installment by using plastic card aka credit card. The best example you can see is buying luxury car even though their income does not allow you to do so. They have bank loan to its maximum. This group of people are more materialistic. They love shopping and buy luxury item for nothing.
Robert T.Kiyosaki in his Increase you financial knowledge teach us to expand our means, which means to earn more money to have a better life. This is totally different direction for live below your means. If you want spend more, you must think of earning more income so that you can afford it. In this context, you are not live beyond your means but expanding your means to the next level. You are increasing your income to afford a better lifestyle which is the life you dream of and persuade.
We cannot always live below our means, which is a comfort zone. Most people are just too lazy to get out of comfort zone and continue to lazy-ing all the way. So, we still need to expand our means in some circumstances to gratify ourselves and provide energy to us for heading forward.
Of course, by expanding your means, does not means earn more spend more. You still need to do financial planning and budget for your income. In conclusion, if you want to have a better life in the future, you can only expand your means. If you life below your means, you need to be frugal about everything. That isn’t the life we desire right?
Actually Robert Kiyosaki’s idea is still same direction as live below your mean, but instead of staying stagnant, you need to expand your capacity in order to live better, but still live below your mean. Take example of Donald Trump’s extra-luxurious lifestyle, do you think he live beyond his mean? no, he earns billions of dollar a years and what he spends is still far below his mean.
[Reply]
Mrcoolku Reply:
October 20th, 2009 at 10:12 pm
Expand your earning power to make you better at the same time one still need to do financial planning. So, the financial planning is crucial.
[Reply]
Wong Mun Keong Reply:
November 12th, 2009 at 1:18 pm
I’d say money management is the first step to Financial Planning
– else no “bullets” for emergency/buffer funds, coverage and investments.
[Reply]
Mrcoolku Reply:
November 12th, 2009 at 8:20 pm
Money management is indeed important before you start investing. Else you will not fully maximize your money from return of investment.