In the world of business we often say the deal was inked when expressing that a contract was signed and executed. The various documents we sign for credit cards, student, car, personal, business and home loans are contractual documents. We pledge that we are willing and able to pay back the loan. Often times we pledge collateral to secure the loan in the event we default on payments.

I have talked about living below your means and using credit wisely only when absolutely necessary in various articles. For many the concept of living below your means creates images of people who dress in unfashionable garb, drive only beat-up vehicles and live in humble housing. In actuality people who live below their means understand how to work with the money they make. They prioritize their goals. They are living today and preparing for tomorrow. They “Think before they Ink”. Before signing short-term or long-term credit obligations, they evaluate whether or not the newly created bill interferes with the big picture. They want to know if this new obligation will restrict their ability to obtain and do other things they enjoy having and doing. For example: A young couple may ask themselves, if I was to purchase this second car making payments of $525 per month for 5 years. Would it interfere with our plans of having a child in two years? Can we afford this car note and cover the expenses that a new child will create? They began to prioritize. Should we postpone having the baby or purchase a more affordable car. From there a decision is made.

In my view living below your means is about taking control of your finances and understanding what you can and cannot afford. It forces you to think outside the box and find other ways to enjoy the luxuries of life. Depending on the priority of certain items, many people who live below their means drive fancy cars, live in nice homes, take extravagant vacations and wear designer clothes.

I have several friends who practice living below their means and use credit only when absolutely necessary. For the sake of anonymity I will create names for them.

People often wonder how Skinny Penny is able to take two extravagant vacations per year, wear fine jewelry and designer clothes. People think that she is making tons of money. What they fail to realize is Skinny Penny is a young lady who “Thinks before she Inks”. Skinny Penny knows that she likes to travel and wear nice clothing. Therefore when she bought her first home, she bought a 4-unit property. She occupies one of the units. The rent payment from the other unit covers the mortgage and creates extra income for her. Before she purchased her home she paid her car off in full. Therefore she has no car payment, her tenants pay her mortgage, and she has a surplus from the rental income. The average car payment is $400 per month and the average cost rent payment is $700 per month. Skinny Penny is able to bank on average $1,100 per month. That equates to $13,200 per year.

Another friend of mine Nickel-less recently purchased a Lexus. This car has all the toys, leather interior, banging stereo system, power hole and more. It even came with a first aide kit, clothe in a Lexus pouch. She also helps out her elderly aunt and uncle with money for their necessities. People think she makes tons of money. What they fail to realize is Nickel-less “Thinks before she Inks”. Nickel-less accepted a modest apartment in comparison to what she can afford. It freed up money for her to save for a down payment on her home. Her goal is to put 20 percent down. Nickel-less purchased a 3-year-old Lexus. The original owner took the bait and paid the invoice price for the brand new car. Nickel-less waited for the car to depreciate 40-60 percent. The car looks new with only 30,000 miles at the time of purchase. She negotiated the price to an acceptable level. She put a decent amount down. She ended up with a 3-year car note that she plans to payoff early.

I have another friend who purchased a home far less than what the bank approved him for so that his wife who is a Registered Nurse can stay home and raise the children. I have another friend who told me that she does not have any designer bags such as Coach or Mark Jacobs in her closets. In her next breath, she tells me she has a retirement portfolio worth $60,000. She is only 31. I personally was able to create a business with a dollar and a dream—no grant money and no loans. I made sacrifices in other areas of my life in order to do so. I may not have grown as fast as I would like but having no debt on my business ensures that I will have longevity in this business.

In closing “Think before you Ink”. “Comprehend before you spend”. The cost of daily living is too expensive to do otherwise.

(Damon Carr is owner of ACE Financial. He can be reached at 412-856-1183.)

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