Why is it that the married couple next door are going into foreclosure despite their high-paying jobs?
Why is it that Uncle Bill, entrepreneur and self-made millionaire with the fancy things, still uses cash advance companies to forward him some extra dough?
Why is it that although your doctor makes well over $100,000 per year, he has to file for Chapter 13 bankruptcy?
The answer is quite simple, yet it escapes the vast majority of people living not only in the United States but to those who are living in other countries as well. The answer is to live below your means.
A common mistake people often make is to spend more with every pay increase they get. Every bonus check and every overtime check is used to purchase more material instead of being put away into a savings account. That big promotion at work may be landing you a few extra thousands per year, but that should not be reason enough to buy a house that is $100-200,000 more than what you can afford. It doesn’t mean you should immediately buy that fancy car, no matter how tempting it is to drive away in a brand new Ferrari 360 Modena. It doesn’t mean to blow all that hard-earned money on weekly dinners at the most expensive upscale restaurant in your city.
But that also does not mean you should restrict yourself from all fun. It doesn’t mean you should never buy that flat screen TV you’ve always wanted or to skip out on that vacation to Jamaica that you’ve wanted to go to. It’s okay to indulge once in a while. After all, you did work to make the money, so you have every right to spend it. Just be responsible with it. Life feels much better when it is going smoothly, and being debt-free certainly does help. Plus, having thousands in your savings puts your mind at ease when there is an emergency or an unforeseen event, such as you or your spouse being laid off, or worse, an illness.
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