Monday, July 6, 2009


What is LBYM? It's an acronym that means, Live Below Your Means.

It is said the difference between the wealthy and the poor is only 2 cents. The wealthy earns a dollar and spends $.99. The poor earns a dollar and spends $1.01. One knows how to live within their means, the other doesn't.

Does the above paragraph make sense? If so, follow along with this thought: Not only does the poor spend 2 cents more, but in reality, they must now earn $1.50 to now spend the $1.01 (if not more). Why, because on the dollars they owe on consumer debt, their payment on that alone could be 25% interest. Then, to cover that extra 25%, they now have to work more hours to increase their pay to cover their debt. More income means higher taxes. So now they are working more hours, paying higher taxes, making payments on their debt, more stressed, while the guy who LBYM is out golfing enjoying life and is actually getting farther ahead, because he has money in investments that creates passive income.

Isn't it amazing to read about people like the golfer, John Daly, who said he has earned over $60 million in his life and is now broke? Or how about Mike Tyson? Forget about how much they could have made through investments. If they had just saved half of their fortune, they would never have to be concerned with enough money the rest of their lives.

I wonder now that they have gone through this, if they had another big payday, say $25 million, would they be able to LBYM and save some, or would it all be pissed away again?

The trick is not to live above your means, not at your means, but below your means. What do you do once you have what you need for the rest of your life? And you still have money coming in. Do you then spend more money? Why not? But still be conscious of what you're doing and don't go overboard.

Little things I do to LBYM. First, I shop at Walmart, Costco and the $.99 store. Many people look down on the $.99 store, but I actually buy most of my fruit and vegetables there. The quality is often better than going to the supermarket and of course what would cost me $5 in the supermarket, costs me a dollar at the $.99 store. I'm always amazed at how much I get there for so few dollars. And if the vegetables do start to go bad, I can just juice them and eat them that way.

I bought my gym membership a long time ago. My annual rate for life is only $60/year. And I'm usually at the gym a minimum 3 times per week.

For entertainment, I buy a yearly pass at Disneyland and at the beach that covers my parking. Also I golf at inexpensive public golf courses a few times per week.

My wife and I are on the same page when it comes to spending money. We are by no means cheap, but we certainly aren't frivolous. We enjoy ourselves much, take vacations, but you won't find us spending $20K for a trip. In fact, this is a vacation resort that we love. Talk about value for your dollar, check it out for yourself.

So LBYM is a powerful concept. It can set you free. Wouldn't it be nice to actually owe nobody? In a society that encourages wasteful spending, do the opposite and perform careful saving.

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