Live Within Your Means: The Most Important Money Lesson I Have Learned

On the tail end of the baby boomer generation, I have made many money windfalls and mistakes. Every year I have filed my own taxes and done my own investments. I'm sure a professional could have navigated the course with much more precision, however, the knowledge I have gained is priceless.

I am not quite sure where I heard or was exposed to one simple statement that made an impression on me in my early years. The simple concept that no one will care more about my hard earned money than me. That does not mean I had to figure it out on my own. It simply meant that I must be as careful choosing investments and advisors as I would choose a babysitter or spouse.

So what has been the most important lesson along the journey? Live within your means. In this day of leverage and exploiting other peoples' money (OPM), too often I have been burned by simply stretching the budget or counting on a guaranteed payout that never materialized. Let's be clear, I am not risk adverse. There have been times I have gambled and won - won big!

Live within your means has more to do with creating a solid reserve to cushion downturns and mistakes. Sure there is a budgetary component to living within your means. However, it has more to do with earning the right to place bets or get into the game rather than arbitrarily engaging. If you find yourself with too much month left at the end of the paycheck, then you have not earned the right.

I am on my third rise from a fall. The first had everything to do with social immaturity and not picking a good life partner. When that ended, so did my financial health. The second came from trusting a Blue Chip company that had me locked with golden handcuffs. On paper I was a millionaire. When the company filed for Chapter 7 bankruptcy, many of us were caught blindsided. Despite what you may hear from your politicians, there is no such thing as too big to fail in a capitalistic society. I have once again dusted myself off, repaired my bruised ego, and set a course for financial freedom.

This time my wife and I have made a commitment to buy stuff with cash. No more mortgages, no more car payments, no more credit cards. We will live within our means. Our credit is great but our expenses are high. There was a time when I was looking for every angle to leverage buying power or finance something I could not yet afford - not anymore. If I can not pay cash for it, I will not buy it.