by Rajesh Saxena

Created on: July 31, 2008   Last Updated: October 31, 2008

Reflections: Learning to live within our means and plan for tomorrow

We have to realize that today's day and time are very different from any age that man has lived on the face of earth. We have created a very advanced civilization which believes in advancement of economy and capitalism. All this has trapped our lives in a nexus of high pace, rising cost of living and increasing stress. These efforts to make the most returns on capital employed have become the very basis of our economics.

We have to take these learning, now almost breathing axioms, as our guiding principles in day to day life. So lets face some facts upfront before we decipher the thought of "living within our means" and "planning for tomorrow". These are

Costs are normally on its way upwards
Costs increase for us as we age
A small increase in our quality of life translates to a very high increase in cost
Our incomes do not normally increase at the same rate as the costs
Our savings can grow to a minimum Ten Folds in 20 years
There is a merit in "penny wise, pound foolish" thought!
Cash is King!
Emergencies do not come with prior notice!

I know that these look as most basic thoughts,(some are controversial in presumption, but will bend against us in today's time and date) but has seem to miss them when we plan for our lives.

So with these thoughts in our mind, what would "living within our means" imply? It is left to our interpretation but the first take would be to contain our lifestyle within what we earn.

Firstly, understand how better off are you today? Answer this question, if you're income was to stall completely, will you be able to sustain your current lifestyle for 6 months? If yes, then congratulations, you have made it! You are ready to employ your capital for better returns, in simple words, you are a great bet! But, if the answer was somewhat different from "Yes!", then perhaps, your primary focus for this year should be to increase savings!

You have guessed it right, "living within means" actually means "Yes!" to that question. But, increasing savings is not as difficult as it sounds, neither it has to be a painful experience. Savings, can be achieved by either increasing your incomes, or reducing your costs. But, I can assure you, (from my cumulative bad financial decisions), cost saving never hurts! Ironically, cutting down is actually more peace of mind!

Become as cost conscious as you can be, and then you have learn the difference between, "nice to have" and "need to have". Focus,

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