We’ve all heard the phrase “Living within your means”. The question is what does it actually mean? Does it mean that you only spend what you have on hand? Does it mean you can take out personal loans, secured loans, or unsecured loans as long as you think can cover them? There are many ways to approach this question, and in the end only you can make this determination. However, I’d like to give you my take on it.

Personally, I interpret “living within your means” as being able to deal with the effects of spending money. The best way to explain is by example. Say you want to buy a house. If you buy it, then you know that to comfortably afford the mortgage you have to give up your current car and buy an older used one. If you’re fine with that, then you should buy the house, even though it is an extra expense. However, if you want the car and house, then you should wait until you’re in a position to float both before you buy. In other words, as long you can afford the trade offs for what you want to do, then you can spend the money.

What about loans? What if you could take out a loan and afford both? Again, if you can deal with the extra expense (in this case the loan payment) for the life of the loan then you can go for it. However, if you think you might default before that then you should decline. For example, the loans that I have taken out have been for college. My college education has allowed me to get where I am today, so even though they were substantial loans they were worth it and I can pay them without having to worry about defaulting. However, I have had friends take out loans for other various reasons where it has not worked out so well. 100% of their problems have been that they’ve gotten in over their head. Loans work just like everything else, although their impact will last a lot longer than an immediate purchase. You need to make sure you are comfortable with the life of the loan before you commit to one. Also, make sure you get some good loan advice (especially about personal loans ) before you proceed.

Overall, the definition of “living within your means” is completely up to you. I urge you to take a look at the big picture before you determine what it means to you.

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