I make no secret about the fact that I live well below my means. In fact, on any given month, I only need about 45% of my income to pay my bills. The rest of my money goes to whatever I want, which right now is to debt repayment.
My OverExtended Budget
I wasn’t always like this. When I first graduated from university, I had a very overextended budget.
- I wasn’t making very much right out of school.
- I was living in an expensive one bedroom apartment in a big city
- I’d just bought a new-to-me car after totalling my old one.
- I had a large student loan payment
- I liked to eat well
- I wanted to build an emergency fund
All of these expenses resulted in a budget that just barely balanced. I could just barely afford to have all of this stuff on my entry level salary.
It wasn’t fun. My husband and I realized, at that time, that we just couldn’t afford to keep living in that city if we were going to achieve some of the goals we had in mind for our life, so we moved back to our rural home town where the cost of living is a lot less.
Your OverExtended Budget
Chances are, if you are a typical 20 something with a university level education, your expenses look something like this:
- A mortgage on a condo or house, or high rent.
- Student loan payments
- A financed car
- A second financed car
These things aren’t crazy, they aren’t extravagant, they are what a typical young couple is expected to have. Unfortunately these things, for the average couple, would probably eat up the majority of your income, leaving you with little and less to spend on achieving goals, participating in memory building experiences, and generally allowing you to sleep at night.
If you are anything like me, this will leave you stressed, frustrated, and anxious. When my budget was overextended, I worried all the time! I worried about not being able to pay my bills. I worried about not being able to build an adequate emergency fund. I was frustrated because with those high expenses, it was going to take me a decade to pay off my student loans. Saving for retirement or to buy property weren’t even in the realm of possibility.
It wasn’t worth it. The expensive apartment, the awesome city, the higher expenses, it wasn’t worth the stress and anxiety that my overextended budget was causing me.
Living with an Under Extended Budget
Today, I live well below my budget. 55% of my income can be used for whatever I want. I love living like this for the following reasons:
- It gives me the means to eliminate my biggest fixed expenses (my debt) forever
- It allows me to achieve big goals, like building an emergency fund, and saving for a house
- I don’t have to worry about losing my job as much, because my expenses are lower than what my employment insurance income would be.
- I can save for travel, and big purchases very quickly
My Balanced Budget
Of course, I don’t plan on living like this forever. Eventually I’d like to move back to the city, at which point my expenses will go back up. But in the mean time, I plan on ridding myself of as many fixed expenses as possible, including my debts, so that I can keep some flexibility in my budget.
I don’t plan on having super low expenses forever, but I never want to go back to having every single dollar of my income claimed by my bills.
Living with an overextended budget is not worth it.
Do you live with an overextended budget? Is it causing you stress?