The Importance of Living Within Your Means & Common Pitfalls to Avoid

Today, after work, I went for a run like I regularly do. Near my work are several developments of beautiful homes that start in the $900,000's. So essentially, million dollar neighborhoods. As usual, during my run the gears in my head started spinning. I have pondered many times the income needed for such home(s). Most, but not all, of the residents I have observed appear to be working class people with children. I work in relative proximity to the capital so I've surmised these people must be:

• high ranking government officials
• doctors
• surgeons
• etc....
• maybe some retired senators or retired somebodies from xyz high paying job.

Now, I will say first of all good for them if that's what they can:
a) afford
b) need
c)want (this is ranked last because it can't exist without a and/or b)

Very few people out there can actually really afford this though. For sake of simplicity let's just take a $900,000 home. For a 30 year fixed mortgage at a 4.75% interest rate, we have:

1. Monthly payment of $4,694.83
2. 30 year total interest paid: $790,137.37
3. Total paid: $1,690,137.37

Gosh, ends up being nearly twice the original purchase price! That monthly payment doesn't even take into consideration: utilties, expenses, property tax, possible HOA cost, etc.

Taking that monthly payment alone, with simple math, we deduct a whopping $56,337.96 a year !! That is many Americans base salary! If not more! In fact, according to 2015 stats by business insider, the median income in the US is a "mere" $52,250! Mind blown yet?

Over the years, I have read things saying if you have a partner/spouse, financial advisors say you should IDEALLY be living off the person whose salary is the least. Example :
Jackie makes $42,000, Joe makes 65,000
Therefore, the pie in the sky situation is save Joe's income, use Jackie's income for living.

If you're financially unable to do that then you ideally live off the larger salary, save the smaller one.

I don't really know of many people at all who are able to actually acheive this. Maybe 1 or 2 couples personally, that's it.

My partner and I can't live off either of these models currently. Mostly because I have a fair amount of college incurred and related debt. He also has debt. Our current situations would not allow us to rely solely on one person's income at the moment.

A few months ago, I was listening to the radio on my ride to work, discussing this concept. It basically was a story like this:

Sally & Joe both have their "dream jobs" both relatively fresh out of college. They both have student debt. But they make enough that renting doesn't make sense so they decide to buy a home. Joe shoots conservatively, wanting a home that had some outdated features, but was within their price range . Sally wants the home in a newer development that needed no updating of features, but it was just outside their price range . Joe is against this. Sally argues they will both inevitably get raises, they can cut other expenses, it will work. She convinces Joe this will work. They buy the home just outside their price range

Before ya know it Sally is preggers. Extra expense of a child now (come on we all know how expensive day care is). This couple soon finds out. Meanwhile they are making budget cuts at Joe's job. He loses his job. LONG STORY SHORT, THESE PEOPLE GO INTO BANKRUPTCY AND HAVE TO GO LIVE WITH THEIR PARENTS.

Hence, it is IMPERATIVE to live within your means ! I can easily see the above situation happening to some couple in the nice, rich neighborhood I ran through earlier. Big ouch!!!

Here are some common things that can happen to single and hitched people that can easily have you living paycheck to paycheck, or worse:

• Taking out store credit, because what you want to buy is just outside your price range and you just have to have it . Sorry that watch really can wait.
  
• getting the latest piece of technology when you don't actually need it . This one can be frustrating. Yep, i currently use a Samsung Galaxy S5. It still works just fine. However, the S6 hit the markets almost right after I got the S5. Of course, with nicer features and all that. (Insert eye roll here)
• PAY DAY LOANS - you think well, I just need an extra $500. That $500 will turn into $3500 when they start hitting you with those 1000% interest rates!
• buying things just for the sake of having them (aka the classic "keeping up with the joneses) LAME. Who cares? We had neighbors at one point growing up that paid very close attention to anything my frugal family bought. The next day they'd have the "better" version of it. (Insert eye roll number two)

Those above are just a small amount of potential pitfalls. Most I am aware of due to personal experience or observing it. If you know of others, please do share!

It should also be noted - often those living the simplest of lives are richer in soul and also money. Example:

• Joe: retired. House paid off. Monthly needs/wants = steady $1800 a month. Joes retirement income is $3000 a month. He saves quite a bit as you can see.
• Martha: also retired. House also paid off. However she has a lot more "wants" than needs putting monthly expenses at $4100. Her retirement income is $4500.

**who's richer joe or Martha? ? **
Should be pretty clear.

So, in summary living simply is the way to go. I am by no means saying you can't treat yourself.
don't be frugal to the point of misery
Just live within your means you'll be happier.

Thanks for reading. As always, hope you are having a great day /night and FULL STEEM ahead!

Image source 1: https://goo.gl/images/qD3mzR
Image source 2: https://goo.gl/images/iSgUb9
Image source 3: http://www.esquire.co.uk/style/watches/news/g9664/9-most-expensive-watches-in-the-world/
Image source 4: google image

Information source 1: http://www.myamortizationchart.com/30-year/900000-dollars/4_75-percent/
Information source 2: http://www.businessinsider.com/middle-class-in-every-us-state-2015-4

All other info - my head!