Living Below Your Means
Feel Poor to Get Rich

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By Plato90s
August 5, 2003

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Given the recent economic downturn, there has been an absolute flood of news and feature articles about how people are struggling with debt, layoffs, etc...

A person gets a new job paying more, and they buy a new car. Big money freelancing during the technology boom, and commit to a huge mortgage.

Then there are people who go into consumer debt by buying things beyond their ability to pay for. Blue-collar salary and white-collar lifestyle just don't mix well.

What is boils down to is that people spend more money when they feel rich. Whether they actually are or not isn't relevant, just the feeling itself seems to prompt certain people to spend.

The key to LYBM for me is that I keep myself feeling poor all the time. The principle of "pay yourself" doesn't work if the money is still accessible and you know it's there. It takes a great deal of mental discipline to have a large bank account and still not get that "rich" feeling. I know I find myself thinking more about spending money when I feel like I have money.

Bad idea in general.

In pursuit of the goal of thinking poor, I've been going to great length to hide money from myself.

I buy US Treasury savings bonds, which absolutely can not be cashed for 1 year and carries a 3 month interest penalty if cashed within 5 years. The purpose is to create barriers to liquidity.

I put my e-fund in a different bank than my day-to-day bank. That way I don't see my e-fund balance when I get my regular bank statements.

I deliberately set my monthly budget at a level which I know is below my average spending level. The goal is to create a mental barrier for myself since I perpetually look like I'm going over budget. I only meet my budget goals when I under-spend on either the discretionary fun spending (read: beer with friends) or the eating-out part of my budget. It helps to restrain any notion of buying that electronic gadget I just saw in the mall.

As long as I feel poorer than I actually am, I do a lot better job of living below my means.

Thus it's puzzling to me to see people trying so hard to buy the material things, which make them appear to be better off than they actually are. It only makes sense if I assume that self-confidence and self-image deficits is driving the consumerism in question.

So the next time you see someone acting financially irresponsible, consider that logic alone won't help restrain that person. A lot of times, it's the emotions that drive the purchases. Along those lines, I often advise people to go to the consumer debt support groups or a religious organization if they're so inclined. Being able to feel poor without feeling bad about yourself is, IMO, a way to successfully LBYM.

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