Living below your means is not easy

It’s well known that, living below your means is the right thing to do.  But, it’s easier said than done.

This is my personal story, and I’d like to share it with you.

In the spring of 2000, I bought my first house.  The mortgage was the 30-year term, with the fixed rate of 8.25%.  You must be thinking that, it’s insanely high.  You are right.  That was right before the bubble burst of the technology stocks.

Looking back, I feel the house purchase was really an overstretch to me financially.  I was in the borderline of living below or beyond my means.

3 mistakes I made:

  • Mistake #1: I rushed:

If things were to start all over again, I would wait for another 2 to 3 years.  The conservative and right approach is:  just rent an apartment, and save more for the house.  In this way, the amount of the mortgage would be lower.

At that time, I had only worked for one year and half, after graduating from the college in US.  As you know, the new graduates usually don’t make that much.

In order to make the 20% down payment, I had to take the Home Equity Line of Credit (HELOC).  In this way, the HELOC was piggybacked to the mortgage.  Quite a lot of debts for a new graduate.

  • Mistake #2: the house price was too high:

During the house hunting, I checked the houses in different price ranges.  I really should consider a house at least $30K lower.

The house purchased was what I wanted, not what I needed.  It was a brand-new house.  That attracted me the most.  Yeah, everything was new.  Nobody ever lived there before.  Is that nice?  But the related financial burden was not nice at all.

It was very easy to find a similar house, just 10-15 years old, with the same size, and amenities, in the similar neighborhood.  And the price would be $30 to $35K lower, at least.

  • Mistake #3: adding fuel to the fire – a car loan:

8 months later after the house purchase, I got a brand new car.  The trade-in of the old car was not much.  As a result, a big car loan was added to my shoulder.  The term was 5 years, and the interest rate was lovely 8.5%.

What in the world was I thinking then? 

I was young, and bold.  Those decisions were not smart.  Let me tell you why.

Both the house and car purchases happened after I relocated to central Ohio from Northern Virginia.  In terms of house prices and cost of living, it’s much lower in Ohio for sure.

The same house in Northern Virginia would be costing at least 50% higher at that time (now the price difference is even more).

That gave me a false impression, and made me think in a wrong way:  the house price was so low, and let me get a better house.   Then, I wouldn’t have to move the next 10-20 years.

But the most important questions were ignored:  Do I really need it?  Can I afford it?

That was the first time I was in debt.  I just had no clue what the debt really meant to me.  When I started paying the mortgage, property tax, insurance, maintenance, and buying furniture, it seemed an overstretch.  Today, to me, it was definitely a stupid decision.

The car loan was an even worse call.  My old car was still in good shape, and I should drive it for another 3 years at least.  Why did I buy a brand new car?  I must be out of my mind.

At that time, I loved the shining new car a lot.  Who doesn’t?  It did look far better than my old car.

I was already carrying a big mortgage.  What difference would it make to add a car loan at the top?  What a dumb thought.  Like an old Chinese saying: “Once falling into the mud, you won’t mind the water spilled on you anymore.”

When the first car payment was due, I realized the car purchase was another mistake, a huge one.  Suddenly, the new car stopped shining in my mind.  It only meant that, I had to carry the debt for 60 long months painfully.

How I corrected the wrongs:

In terms of the monthly payments, I was able to make it with no problem.  Luckily, my job was very stable those 4-5 years.  Psychologically, it was a huge burden to me.  I hated the debts, very much.  It kept me awake during the night.  I was living a little bit beyond my means.

Charlie Munger listed the 5 things that guarantee a life of misery.  One of them is: “Refusing to learn from past mistakes”.  He is right.

I learned my lessons in a hard way, and vowed that, it would never ever happen again.

In the following year, my car loan was refinanced.  And the interest rate was brought down to 4.25%.  Then after another year, the car loan was paid off.  What a big relief.

My home mortgage was refinanced twice, and the final rate I got was 5.25% in the summer of 2003.  At the same time, my HELOC was paid off and closed.  The mortgage was finally paid off 10 years after the house purchase.  It was quite a struggle to me.


My current simple lifestyle is a learned behavior, after the long and painful journey.

It would be a lie if I tell you I don’t like the brand-new car anymore.  I still like it, and it does look gorgeous.  But, I have become more cautious and rational on spending.  I like to calm down, compare the pros and cons, and make a wise decision.

The truth is, it’s not easy to live below the means.  It requires quite a discipline.  In our society focusing on materialism, the temptation is always there.  Peer pressure, neighbor pressure, bombardment of commercials on the TV and social media, you name it.

Watch whom you socialize with.  Your friends’ spending habits could subtly influence you, and paralyze your judgment without your knowledge.  It’s like: you’ll become pink when getting close to the red, and become gray when close to the dark color.

Many people make mistakes.  My point today is: pay close attention to your spending habits and debts, and learn from the mistakes.  Don’t let it happen again.

More related information:

Questions to you:  Is it easy for you to live below the means?  Did you ever live beyond your means?  If yes, what did you do to make sure it won’t happen again?

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9 Responses

  1. Steve says:

    Thanks for the mention Helen, I really appreciate it.

    I am sure we all have regrets about purchases we have made but as long as we learn from our mistakes it’s okay. To determine if it is “hard to live within your means” it depends on your lifestyle and income. For me I live a modest lifestyle with an ok income so its fairly easy. When I was younger I lived a modest lifestyle with a low income and it wasn’t as fun.

    • Retire Early Helen says:

      Steve, sure, I’m glad to.

      Right, many people make mistakes, especially when we were young. Even Suze Orman did: investing on stock options with $52K of borrowed money, and losing all. As you mentioned, the key is to learn from the mistakes. In this way, we get better on managing the money over time.

  2. GYM says:

    Thank you for sharing your story and for the mention 🙂 Shiny new cars are indeed very attractive, I can definitely see the allure. Well you’ve done fantastic and was able to retire early, so you have learned your life lesson very very well. That’s a great quote from Charlie Munger and I also like how you mention that you have to be careful who you spend time with because we are easily influenced by those who we spend time with— sooo true!

    • Retire Early Helen says:

      Thank you, GYM. The other day I was at the parking lot of a grocery store. There was a red gorgeous Honda Accord Coupe car there. It was like driven right out of the dealer’s lot, so shiny and pretty. I was looking at that car with awe. The driver noticed my face, rolled down his window, and asked “you like it, huh?” I smiled back: “Oh, yeah, beautiful car!”. The temptation to spend $ is everywhere.

      Charlie Munger is a very smart guy. He says a lot of things in a simple and humorous way, and it makes great sense.

  3. Gaby says:

    Great post. I’m becoming more and more passionate about living below ones means. Especially when it comes to–like you mentioned–peer pressure or societal pressure.
    In my own personal case, family pressure! When my husband and I finally purchased our first home together, it was after patiently waiting for the right time and saving at least 20% down payment for the house. We also live in central OH and I feel lucky that we bought our modest home back in 2014, because the market seems to favor sellers right now as prices increase, as well as demand.
    When my parents came to see our house for the first time as we moved in, I remember being so proud of our purchase only to hear my mom say, “Eh…it’s not big enough”! They still make comments and offer to throw money at us so we can buy a home twice as big (but with twice the amount of bills and property taxes, which they don’t seem to understand why we’d like to avoid).
    That’s just an example of where we find ourselves really having to ignore comments because we know we have enough. A 1600 Sq ft 4 bdrm 2 bath home is enough! We have no desire to keep up with the Joneses, but I feel for those who do and get themselves into a ruthless as a result.

    • Gaby says:

      I meant to type “rut” not ruthless!…hate auto correct!

      • Retire Early Helen says:

        Gaby, thanks a lot for sharing your story. You did great about your first home. Not many people are able to put down 20%, and they have to pay the PMI. You are right, the family pressure has probably more influence, as we are so close to it daily. As long as you and your husband like that house, and it suits you folks’ needs, that’s what matters. I’m very glad to hear that, you are becoming more passionate about living below the means.

        Yeah, the house price in central Ohio went up some lately.

  4. Joe says:

    I think many of us made that same mistake. When you’re young and are making good income, you want nice shiny things. We purchased a brand new home at about the same time too. I don’t regret it because it was a foundation of wealth building for us. We turned it into a rental and eventually did a 1031 exchange into our duplex.
    If I could go back, I’d just purchase a multi family home in a nice area instead. Hindsight is 20/20. It worked out okay so I can’t complain.
    Thank you for the mention! I really appreciate it.

    • Retire Early Helen says:

      Joe, that’s great you were able to do the 1031 exchange for your new home. Yeah, the first purchase of the house and car was quite a learning experience. After I sold my first house, and bought the 2nd one, I was more realistic and wiser. I personally don’t like the car loan, and bought the 2nd car in cash.

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