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In a few days I’m teaching a class.

The topic?  How to live your life within your means.

Normally, this wouldn’t be newsworthy. I am a teacher after all with over a decade of experience. Rolling into a classroom and doing my thing is…kind of my thing.

But I have to admit, I’m more nervous about this class than any other I’ve taught since my first ever first day of school.

As if the topic of living your life within your means wasn’t intimidating enough, there’s one other terrifying thought that’s keeping me up at night (not really, but the exaggeration adds to the drama I’m trying to create with this intro).

I’m teaching adults!!!!

The Topics

When I was approached by a pastor at a local church about teaching a class on money and how to live your life within your means, my mind was simultaneously excited and panicked.

What did I know about living your life within your means?

I mean, we are pretty meticulous when it comes to planning out our monthly spending and saving goals. We’re saving for retirement and our kids’ education. As well, over the last 8 years or so I’ve developed a real interest in personal finance which has ignited a passion for learning and growing in this area. Not to mention, it’s what ignited this blog.

But did I really have something worthwhile to share with the diverse group of adults who’d be attending and looking to me to share sound financial principles to help them live life as the masters of their money? Was I “expert enough”?

As I reflected on these questions and tried to push the imposter syndrome to the side, my mind turned to what I have learned in my journey towards financial independence, one that I’m still in the middle of.

I thought about what had worked for our family as we made the many conscious decisions to move towards becoming financially free.

What had led us to feel less worry and stress? What had helped us to accomplish many of our financial goals? How had we been able to overcome the unexpected expenses that had arisen over these last 8 years?

My mind whirred with activity and slowly a series of cornerstone principles began to take shape.

As I began putting pen to paper (or more accurately, finger to keyboard) these 9 principles for living within your means emerged.

Understand Money is God’s and Not Yours

As a follower of Jesus, I’m convinced beyond a shadow of a doubt that all I have, whether my talents, time, or my taxable income, or the many other blessings and resources I have, all come from God.

This may be a foreign concept to some, but for me, it’s foundational.

As a result, I’m not the “owner” of these resources. I’m the manager. And like any good manager, I have a responsibility to manage the resources efficiently and effectively in the best interests of their owner.

A big part of that is giving generously to the work of our local church and to different ministries and groups locally and around the world.

I’ve discovered that as I take control of my money, it loses its control over me. I’m its boss, not the other way around.

Sure, I still worry about money at times. I think everyone does. But I’m not a slave to it. It doesn’t control me.

And I can say with complete confidence that what I have received FAR FAR FAR exceeds anything I’ve personally given.

Understand How Deadly Debt Is

If your trying to live your life within your means, debt is the silent killer of your goal.

Why?

Because debt has become so normal today.

Mortgage, car loans, student loans, credit cards, and lines of credit. Buy now, pay later.

You can finance everything from tattoos to tables.

Not only are these types of debt everywhere, but finding people without debt can be like my wife searching for her phone…again…and again (Thank you Tile !!).

Debt is a financial anchor. Paying it off, especially the high-interest consumer kind, can take years and end up costing you thousands of dollars more than you originally borrowed.

This is because the most powerful force in the universe according to Einstein, compounding, works against you.

It’s like trying to climb up an escalator moving down. It’s a painful, exhausting, and frustrating experience (not that I have any personal experience with it…I’ve just heard that’s how it feels, ya know, from people I know).

Over the long haul, trying to live your life within your means with debt will be nearly impossible. That debt anchor will constantly be dragging you down and it’ll be tough to keep your head above water.

And if you can’t get rid of it, it’s only a matter of time before you drown.

Live Your Life With Good Role Models

O.k., so debt is bad.

But what’s the alternative and who can we look to as financial role models?

Well if you want to get in shape, your fat, cigar smoking uncle with the killer dad-bod is probably not who you want to be taking advice from.

In Thomas Stanley’a classic book, The Millionaire Next Door, he details the spending habits of ACTUAL millionaires.

What did he find?

First, they live lives well within their means. They’re not lavish spenders or hyper-consumers. They’re not in debt.

Not shocking.

What was shocking were the specific details of how they spent their money:

• Most they ever spent on a suit? → $399
• Most they ever spent on a pair of shoes? → $140
• Most they ever spent on a watch? → $237
• Only 23.5% own new cars
• The typical millionaire spent $29,000 on their most recent car (average person at the same time paid $21,000 for their car…not much less than the MILLIONAIRE!!)

If you want to live your life within your means, controlling your spending and understanding how deadly debt is are key to your financial future.

Even your obese uncle with the meat-shank biceps can figure that out.

Know Your Role – Give Your Money a Job

Money is a great servant, but a terrible master. In order to make money your servant, you need to tell it what to do.

Think of it like a helpless 1st grader who needs painfully detailed instructions to accomplish even the simplest of tasks. If you don’t tell it EXACTLY what to do, it’s not going to do it.

That all starts with having a monthly plan for each dollar of income you earn, otherwise known as a budget.

Now in some houses, the word budget is a swear word. In ours, it isn’t anymore, even though it used to feel like one.

When most people hear the word budget they think straight jacket, financial handcuffs and eating rice and beans for every meal.

But really, having a budget is the exact opposite. It allows you to give every dollar you earn a distinct purpose. And the best part is, you get to decide the purpose!

Sure, something’s you’ll NEED to budget for (lights, heat, water, food, housing, transportation), but others you’ll get to decide on. For us, this gives a real sense of freedom and security knowing that if we stick to the budget, we won’t run out of money before we run out of month.

A Prescription For Financial Health

The key is to change your mindset in how you view a budget: it’s not restrictive, it’s prescriptive.

You’re prescribing what you want your money to accomplish and giving every dollar a role to make that happen.

It’s like when a doctor prescribes you medication. You can look at it and say, “Oh man, this doctor won’t let me take any old medicine I want. They’re really restricting my freedom!!”

Or, like a sane human being, you can say, “Hey, this highly trained professional who is an expert in this field has a very specific and precise plan to help me get well. I’m glad I know exactly what I need to do to get the results I’m after!”

A Million Dollar Example

Once again we can look to millionaires to show us the way when it comes to budgeting.

According to The Millionaire Next Door, Millionaires have budgets. “Planning and controlling consumption are key factors underlying wealth accumulation,” the authors state. “Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.”

There are many great tools out there to get started on your budget. We use the free app EveryDollar and really love it. You may be an Excel junkie who craves spreadsheets like the junior high me craved pizza pops.

If that’s you, here’s a link to post with some great interactive spreadsheets.

The bottom line is that if you want to live your life within your means, you need to have a plan for how you’re going to give, save and spend on purpose.

In other words, you need a budget.

Rainy Days and Giant Umbrellas – Emergency Funds

Besides stupidity, what can most often send people into debt are financial emergencies.

You know, those things you thought would never happen but then did. Things like the losing your job, a leaky roof, a major car repair, or a death in the family).

People are DANGEROUSLY unprepared to handle these life events. In fact, a recent survey found that 78% of people are living paycheck to paycheck.

With such a razor-thin margin between survival and financial destruction, an unexpected emergency can be the spark that lights a person’s finances on fire.

That’s why you NEED a rainy day fund.

It’s not a question of if it’ll rain.

No, it’s a matter of when, how hard, and how big an umbrella you’ll need.

My Experience

I speak from personal experience.

A little while back, my wife’s grandfather died and we all had to fly across the country, last minute and over spring break to attend the funeral. It wasn’t something we were going to miss. And, it was not cheap.

Last year, my hot water tank (just 7 years old) decided it had lived a good, long life, and it was time to throw in the towel. It promptly began leaking all over my basement floor. After trying to sort it out myself, I had someone come to look at it and it needed to be replaced. It was close to $1500 when everything was said and done.

And most recently, just two weeks ago, we took our car into the shop because it had been making a strange sound. Before taking it in, I had my mechanic buddy take a look and he figured it would cost $400 or so.

To kill two birds with one stone, I asked the shop to also do a regular maintenance check at the same time.

Mid-morning I got a call from the mechanic telling me there were “some serious mechanical issues with the car which were real safety concerns”. Perfect.

Because I know and trust my mechanic, I knew I wasn’t getting hosed. $3000 later, the vehicle was safe to drive.

Stress-less Emergencies

Without an emergency fund, I would’ve had to use a LOC or credit card to cover these expenses. I would’ve gone into debt and been CRAZY stressed about how I was going to find the money to pay for them.

With the emergency fund set up though, I paid cash and restructured my monthly budget to replenish the fund. (For accuracy’s sake, I actually put all the above emergencies on a credit card to get the reward points and then paid them off with the cash from our emergency fund).

Not only does it give a sense of peace knowing an unexpected event won’t be a financial burden, but it allows you to continue to live your life in a way that doesn’t destroy your financial plans.

How much do you need?

Most financial experts will tell you that a solid emergency fund has 3-6 months worth of expenses in it. This can range anywhere from $10,000-$50,000.

That’s a good rule of thumb, but it’s just a guideline because everyone’s situation is different.

For example, as a teacher, I’m fortunate to have a level of job security most people don’t. There will always be kids and they’ll always need to have teachers. Because of this, my emergency fund is on the lower end of the 3-6 month amount.

On the other side of the fence, I have a good buddy who’s a plumber. It sucks for him, but he doesn’t have the same level of job security I enjoy. When work slows down, the lowest person on the totem pole gets the axe, whether they’ve been doing a great job or not.

If you’re a person in that type of situation, you’d want to be sure you had more set aside in your emergency fund to keep your head above water as you look for work.

The bottom line is that you need to decide what you feel comfortable with. By having a rainy day fund in place, you’ll keep yourself from digging into debt and set yourself up to live your life with much less stress.

$1000 Quick

If the idea of saving 3-6 months worth of expenses sounds like a MASSIVE undertaking, you’re not alone.

It is.

Consider setting up a mini $1000 emergency fund really quick. This will keep you from getting tripped up by emergencies until you’ve got a few other pieces to your financial puzzle in order.

After you’ve got your mini emergency fund in place, you can turn your attention to fully killing your debt using a tried and tested method.

Debt-Snowball

Once you’re prepped to handle any mini-emergencies, take the money you were towards your $1000 emergency fund and start by attacking your smallest debt first with every dollar you can spare, and the dollars you can’t.

Now I know that mathematically, it makes more sense to pay your highest interest debt first. But personal finance is more psychological than mathematical, and this method works!

Once you’ve paid off that first debt, you’ll get a sense of accomplishment, a high from eliminating it from your list, and a feeling of momentum. Take the money you were paying on your first debt, and roll it over into paying off your second largest debt, along with the money you were already using to pay the minimum on it.

Continue this until you’re paying all you have onto your last, and largest debt until it is all paid off!

Then, take a breath.

Drink in the satisfaction of knowing that you’ve chosen to live your life differently than the majority of people. You have NO CONSUMER DEBT!!!

Finish Your Emergency Fund – Your Ironclad Defense Against Emergencies

Finally, it’s time to buckle down and focus on your 3-6 month emergency fund.

Take the money you were using to pay down all of your debts and use it to bang out your emergency fund.

A note about emergency funds. It should go without saying, but when you have a boatload of cash sitting around there can be a huge temptation to spend it on things that aren’t emergencies.

A brand new car is not an emergency.

Your buddy’s last minute golf trip is not an emergency.

A vacation to “recharge your batteries” isn’t an emergency.

These things aren’t bad. Not at all. You should save for them if you want.

They’re just not emergencies.

A leaky roof, a major car repair, a cell phone that takes a swim in your wife’s hot tea? These are emergencies.

One last quick little tip. As a barrier between us and a terrible decision, we keep our emergency fund account in a separate account at a bank where we don’t do our day to day banking. It’s a bit more difficult to access, so we’re less tempted to dip into it for things that aren’t true emergencies.

Live Your Life Within Your Means – Bringing It All Together

When I get up on Monday night to teach my class I’ll be very nervous. But, I’ll also be super excited.

Excited for the chance to encourage people as they move towards financial freedom and take back control of their lives.

We only get one chance to live our lives. There are no do-overs here. And, although it sometimes feels like time moves slowly, it hums along faster than we can tell.

You work too hard to be a slave to your money. Your family is too important to have your lives ruled by the balance in your bank account. And your future is too bright to have it cast in the dark shadow of wasteful spending and debt. You’re worth too much to live your life bound by hyperconsumption.

It’s time. It’s your choice. Live your life within your means.

What tips or tricks do you use to live your life within your means? Please share in the comments below or on Twitter @method_money or my Facebook page Method To Your Money.  You can also find me on Pinterest.  Want more great ideas for mastering your money? Sign up to receive my weekly emails detailing how to keep more of your hard earned cash!