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If you want financial security, you have to make a decision to live below your means. Being secure about your finances mean you want to have enough savings to be able to afford any unforeseen expense that you could encounter in the future.
However, there is a known investor and motivational speaker who does not believe in the benefits of living below your means. This man is Robert Kiyosaki. He is the author of Rich Dad, Poor Dad and people look up to him for financial and investing advice. In one of the series he posted on the RichDad.com site, he mentioned a lie that we were all duped into believing. He said that to live below your means is actually a very poor mindset. Instead of growing your wealth, it teaches you to be content with what you are earning and just strive to lower the quality of life that you have to keep expenses below your income.
Kiyosaki calls it awful that we are encouraged to live this way.
Why earning more is better than cutting back
There seems like a never ending struggle between earning more or spending less. When you are in a financial crisis, you are faced with this difficult decision that will help you achieve your goals.
Instead of living below your means, the Rich Dad principle wants you to make better means. That is another way of saying that instead of cutting back, you must make extra effort to earn more. Here are some reasons why increasing your income is better than cutting back.
You are growing your personal wealth at the same time.
When you earn more money, that will help you grow your net worth. In the long run, it is more beneficial because you are adding more money into your account. Even if your purpose to increase your income is because you want to spend it on something, that expense will not be forever. If you set up this extra revenue just right, you can keep on earning even if the need to spend has long past. That extra money will no longer be spent and it will only add to your wealth.
Your potential to save is unlimited.
The problem with spending less is you can only get so much extra money out of it. If your current income is only $4,000 a month, for instance, that is not even the maximum amount that you can save by cutting back. You need to spend on your basic needs and that means you will have to make do with probably less than half of this monthly amount - if you are really frugal about it. When you earn more, there is no limit to what you can put aside for your savings or that expense you want to make.
You are trained to be more resourceful.
While contentment is a good things, being resourceful will make you successful. Striving to earn more will teach you this important value that will jumpstart your road to wealth. If you really want to be rich, you cannot settle with contentment. If you choose to earn more, you will be encouraged to find the means to seek other sources of income rather than settling with what you have.
You get to stick to your current lifestyle.
The last reason why it is better to grow your money is to help you keep the lifestyle that you are leading despite the additional expenses that you have to satisfy. If it is debt related, there are changes that you definitely want to implement but it will not be as drastic as the option to cut back would require.
Frugality is still important
While the argument of the Rich Dad about living below your means is logical, you should not completely shun cutting back either. If your reason to increase the extra money from your income after expenses is to buy something, then it is a good idea to earn more. But if your reason is debt payments, you may want to consider cutting back on your spending too.
You debt is enough proof that you had been making wrong decisions about your spending. Earning more will not correct this the way butting back would. You need to learn how to make smart spending choices and eliminate the habits that got you in so much debt trouble.
Living below your means is all about frugality. And we all know that a frugal way of living will help you make better decisions about your money. A frugal lifestyle is more about getting the best value for your money - not about deprivation. A frugal budget will help you identify how you can make better choices with your money.
There is no doubt that you can get more money by earning more but our spending mistakes will only grow with your ability to make bigger purchases. That could lead you to more debt. That is why you need to correct your spending habits if it is the reason you are in debt.
In the end, here is what we want you to do: live below your means but continue to make that means bigger to make life more comfortable. Find the balance and you should get the best of both worlds.