Mormon Channel Blog

Self Reliance: How to Live Below Your Means

April 25, 2015

“Living below your means” is a common phrase used to describe a life free of debt and worry. President Gordon B. Hinckley has stated, “I commend to you the virtues of thrift and industry. … It is work and thrift that make the family independent. Debt can be a terrible thing. It is so easy to incur and so difficult to repay” (“Thou Shalt Not Covet,” Ensign, Mar. 1990).

We reached out to various financial experts to talk about living below our means and how it is a financial principle supported by the prophets of Jesus Christ.

Comparative Buying

Private equity investor Mark Bean says, “As a young married couple with a mortgage, my wife and I have had to learn to live below our means. How do we avoid spending our entire paycheck—or even worse, more than our paycheck? One of our principles is to avoid ‘comparative buying.'

“We make bad decisions when we feverishly buy to ‘keep up with the Joneses.’ Social media may feed us a steady diet of conspicuous consumption, which can lead to our reframing the way we perceive our material condition in a way that makes us feel deprived.

“Remember, just because your neighbor can afford it doesn’t mean you can. In fact, just because your neighbor bought it, doesn’t mean she can afford it.”

Should I Afford This?

David Wood, an assistant professor in the School of Accountancy at Brigham Young University, points out that changing one word in a common financial question can have a large impact on how we manage our money: rather than ask “Can I afford this?” ask “Should I afford this?”

He explains: “What’s the real difference in these two seemingly similar inquiries? Consider a young couple struggling with a low income relative to their expenses. As they think of paying tithing or of having a baby, they might do the math and conclude that they ‘can’t afford it’ because their expenditures are higher than their income. The ‘can’ question only factors in the mathematics of what is and not the faith, hope, and blessings of what can be. While understanding your finances through appropriate things like temporal budgeting is important, it is not sufficient to help us do what God wants us to do.

“The ‘should’ question serves especially well to help us follow the many prophets who counsel us to avoid unnecessary debt. The ‘should’ question also frees us from comparing and coveting what our neighbor has, which often creates an unsustainable, selfish living standard. I have found that when I ask the ‘should’ question on all of my expenditures, I worry less about what I and others have because I’m confident I am doing what the Lord wants me to do even if it differs drastically from that of others.”

When Is Debt Okay?

Jim Brau, a professor of finance from Brigham Young University, points out that “sometimes it can be confusing to Latter-day Saints on what the prophets have counseled about the use of debt. The overall spirit of the counsel is clear—live within our means and do our best to stay out of debt. However, there are four occasions when the Brethren have counseled that debt may be a useful tool to help us achieve our goals. These times are for a (1) home mortgage, (2) education, (3) first-time car, and (4) business.

“Elder Joseph B. Wirthlin summed up the first three in this statement, ‘Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt’ (“Earthly Debts, Heavenly Debts,” Apr. 2004 general conference). Notice the modifiers of ‘modest’ home and ‘needed first’ car above.

“Any debt other than these four exceptions is considered the ‘consumer debt’ that Elder Wirthlin refers to above and should be avoided. Credit cards, furniture loans, jewelry loans, department store cards, etc., etc., etc., should all be avoided.”

Brau states that “during the Great Depression, President Grant said, ‘If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means, and if there is any one thing that is grinding, and discouraging and disheartening it is to have debts and obligations that one cannot meet’ (Relief Society Magazine, May 1932, 302). Think of all of the other things he may have said in the gospel that would bring ‘peace and contentment,’ yet he stressed living within our means.”