The average American mindset is to live beyond their means. If they make $20,000 per year, they will spend $24,000 per year. With this type of mindset, no amount of consolidation or debt reduction help will benefit them in the long term. No matter how much money they make, their expenses will always be higher.
The trick to financial stability is living below what you can afford. Notice I didn’t say “AT” what you can afford. To be actually stable, you have to life below your means. This means if you make $30,000 per year, your spending must be less than $30,000 per year. If you spend $25,000 per year, that puts you in a good position to set money aside for retirement, prepare for emergencies, etc. If you spend everything you get, you’ll go into debt when an emergency comes up and you have an unexpected expense.
Living beneath your means also provides a level of freedom because it puts you in the position of deciding what is important to you. You get to decide how you spend your “extra” money. When you live beyond your means, the decisions are already made for you.
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