72

It's important to differentiate between "living below your means" and being smart about money. Buying a used car with low mileage is generally a smart financial decision considering every car becomes a used car the second you drive it off the lot. Financially, there are only advantages to living below your means. You will save more money which can be ...


48

A simple budget spreadsheet is fine for this. In one tab, track all your income: - take-home money from employment (use an online calculator to estimate if you only know your gross salary, but within a few months you'll have actual real data to work with) - money from interest on savings - any other money you have coming in In another tab, work out your ...


34

Other answers do a good job explaining direct financial disadvantages, so here's another point of view: Living frugally might negatively affect your social life. For example, if your friends like going out for expensive dinners, choosing not to join may damage your relationship. Appearing to be rich, for example by driving a nice car, may increase your ...


26

Should I hire a tax person to represent me? Or go in myself? I'm just afraid of saying the wrong stuff. I can't tell you whether or not you should hire someone, but here are some things you should consider: Penalties/Interest: After an audit, if you owe additional tax you'll pay 0.5% per month up to 25% of owed amount in penalties and will also pay ...


26

I think there are a couple of budgeting tools that have served me very well. Consider the big picture Think about money in terms of years, not paychecks. Netflix isn't just $12 per month, just one latte per paycheck; it's $144 per year. Your rent is $15,000 per year. A Mercedes lease is $7,000 per year. Etc. Make the numbers in your head bigger not ...


26

Vicky provided a great answer and I agree that a spreadsheet is good for budgeting, some of the budgeting apps available make it easier to track spending or resolve deficits/overages in your budget, but none of them are perfect. Having to look at your monthly spending when entering it into your budget can help you be more aware of what you are spending on. ...


19

The big financial disadvantage is likely to be the risk that the low priced home you purchase appreciates more slowly (or declines in value) compared to the better house you could have afforded. This is obviously very location dependent but there are, for example, plenty of neighborhoods in Detroit where home prices haven't recovered since the 2008 ...


17

For quite a number of products, the cheaper option ends up being more expensive over time, an often quoted paragraph in that context is the Boots theory of socio-economic unfairness which highlights the problem well even if it is completely fictional. The running cost of a used car is likely to be higher than for a new car, because there is usually a reason ...


15

The downside to living below your means, is that you don't have the same level of luxuries attainable if you lived at your means. You may also have fewer opportunities. This can impact your life in many ways, including financial. Living in a worse area to save money would be the most common example where the benefits may be deceiving. e.g. your commute ...


11

In addition to the other fine answers here regarding spreadsheets, and zero-based budgets, I have found that another great key to success is to only allocate money to be spend in the month after it was earned. I allocate the paychecks I receive in March to be spent in April, etc., because until I actually receive the paycheck I'm really just hoping that they ...


9

Is there a better way to budget for this other than just having a monthly "random" line item for non-monthly expenses? I think so. car tabs/registration, You know this is going to happen, so increase your Car Maintenance/Repair budget line item by the relevant amount divided by the average number of months between these "random" expenses. identity ...


8

Prove your business expenses and cost-of-goods-sold Let's start with 2015. Start by looking at what you claimed. You need to produce documents to support the expenses and CoGS that you claimed on your taxes. They are looking to see that you really did lay out the money that it was an actual business expense or inventory purchase, and not a disallowed ...


7

how do her rights get protected? There are two choices: You get married. Statutes and case law have created structures for the settlement of property between divorcing spouses. There's no such thing for girl friends. Write a contract (which is -- in essence -- a prenuptial agreement) which specifies things like: how much each of you is contributing to ...


7

What is not mentioned in the other answers, that is listed in the question: If you live in a "worse" neighborhood, there might be a higher criminal rate. That could be a big disadvantage and worth considering, especially if you have kids. This could cost money in the long run, repairs on house or car, stolen goods, and the risk and costs of being injured/...


4

You should live "below your means"! It's vital to save and invest, particularly for retirement. I am troubled by your definition, because it seems to equate living-at-means with spending no more than your income. That definition leaves enough room for the person with no debt whose account just hits 0 as the next paycheck arrives. You need an emergency ...


4

Expenses crop up at different frequencies, but in my experience, the lowest frequency for most recurring expenses is annual. (Some subscriptions can go multi-year, but there’s often an annual option as well.) Some annual payments can be split up into monthly payments, but for others like car servicing, it’s not practical. One way around it is to create a ...


3

It’s important to be able to distinguish an expenditure from an investment, which isn’t always easy (except in hindsight). A more expensive house whose price will appreciate is an investment, especially if it will save you money on things like commuting costs. An education is an investment. A car is an investment if it gives you access to more and better-...


3

Short version: Find a budget methodology you believe in. Remember to save some. Automate as much as possible. My answer sort of got out of hand so I made a shorthand version above with the gist of it. You can read my initial draft below. Long version: There’re a lot of great answers already but I feel I can still contribute some. when I first moved ...


3

One potential disadvantage of living below your means I haven't seen fleshed out yet is that the appearance of being rich and successful can help you in the business world. Even the best of us are still riddled with biases and assumptions. Study after study has shown than well dressed, attractive people are thought of as more intelligent, honest, more ...


3

The answer is 'about zero'. Most gas stations have a sticker that claims that 'the sale volume is corrected for temperature', so unless that is a lie or it is malfunctioning, you won't have any advantage. Although probably the waiting lines are shorter at 4 am.


2

It depends on the granularity you’d like to see when you review your expenses. If you never review your expenses, you can have a single category “Expenses” and put everything there. If you are happy seeing broad categories, you can use something like “Travel” or “Family Outings”. Your accounting package may allow you to drill down to individual expenses if ...


2

It's entirely up to you. Personally, assuming you are spending significantly more on food while you're on vacation because you're eating out more and consider part of being on vacation indulging in good meals, I'd categorize it as part of my vacation budget. By the same token, if you're spending basically the same on food while you're on vacation, I'd ...


2

The only potential financial disadvantage I can see is potentially falling into the trap of penny wise pound foolish mentality. e.g. A cheap used car can be expensive in maintenance Houses in the cheaper region may need more maintenance. It may also mean longer travelling distance to work. Nevertheless, one who refuses to succumb to peer pressure actually ...


2

Just came back from my interview IRS audit. Here's my experience: My appointment was at 10am. When you arrive you have to call the agent to come out to get you. I went with my business partner just so I don't go alone as I'm not sure if I might say the wrong thing and also to backup our claims on certain expenses. I spent a good 1-2 days to prepare for ...


2

Don't. Investing in a foreign currency is a Bad Idea. Then you are vulnerable to currency rate fluctuations. Keeping significant amounts of your money in the local currency is too a Bad Idea, if you are looking for maximum profit. Currencies yield relatively little interest. Instead, you should be looking for more risky investments. The easiest of these ...


2

I need to pay for my rented apartment, food, water, etc., save money for future and medical expenses, etc., how do I calculate the amount of money I can spend each month on expenses that can be classified as "fun expenses"? You don't even need to calculate anything. First thing you do is to pay (or set aside) the must-have things that you've mentioned (be ...


2

One big disadvantage I see - what if you drop dead before you reach retirement? If your goal is to save money to pass on to descendants you may be fine with that, but looking at a single individual money you can't spend is worth nothing. Money is only an artificial construction for tallying what you can do with it - things you can buy (including services ...


2

Summary: I think the overall art is to find your sweet spot in these financial/economical matters and that's something where general advise on particular situations will very often not be appropriate. Overall it's clear that living well below your means is good. Further than that, we can predict/think about particular scenarios, but many may be financially ...


2

The richer and more successful you are, the more you can afford to live below your means. No one is going to be disappointed with, or unlikely to invest with, Warren Buffet, who lives in a middle-class house. From Business Insider: Located in a quiet neighborhood of Omaha, Nebraska lies the home of billionaire Warren Buffett. He bought the house for $...


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