How many people do you know who are always worrying about how to pay the next bill, or at the very least, aren’t sure how they’re going to pay that extra high gas bill? Maybe you’ve heard them comment about how much debt they have? We probably all know many people like that. And how many people do you know with those complaints that make upwards of $400,000 a year?

A woman I know who makes at least $200,000 a year - plus husband has the same job at a different company so probably makes even more than that. Yet she was talking to us about how she’s trying to make a budget for their grocery shopping, and how she’s trying to use coupons for everything now. This same woman has commented that she has debt coming out of her ears.

I never want to be in a position where my household income is $400,000 and yet I still can’t cover my mortgage payments and have to cut coupons to buy groceries. (Nothing wrong with cutting coupons, but these two people are both professionals working 60 - 70 hour a weeks, if not more. They probably would get a better return from focusing on doing their work well than from cutting coupons, as they can directly influence their incomes by increasing company profits.)

The point is, if I can be livingin luxury in a $175,000 house now (which is currently out of my price range), why does it seem that when that is in someone’s price range, all of a sudden they need a $300,000 house?

I think that the ease of getting loans is a big part of this. I inquired with a mortgage broker of how much of a mortgage I could get, and I was told I could easily get up to $200,000 with only 3 months of work history and only 3.5% down! So then it seems almost reasonable to only buy a $150,000 house, right? But as far as I’m concerned, the payments for that house would be way beyond what I can comfortably afford.

I wrote before about my friend who can’t get a credit card because of his limited credit history (he’s new to the country), but was approved for a car loan of up to $45,000! That’s pretty much his annual salary. Buying a $25,000 car when the financer says that you can afford a $45,000 car seems like you’re being prudent, but I think a $25,000 car is way more than I could afford even on his salary.

I think that an important part of living within your means is to keep in mind that the people offering you credit will always offer you much more than you should take. It seems like they would only offer you what they think you can afford, since it’s in their interests to get paid back, but if you sit down and consider your finances and what you can really budget in, you may not be able to pay even half of what a lender offers you!