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What Does It Mean to Live within Your Means?

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By Linda Descano, CFA®, President and CEO, Women & Co. and Managing Director and Head of Digital Partnerships, North America Marketing, Citi

What does it mean today to 'live within your means'? That was the question posed by Megan of The Happiest Mom during a #MomTalksMoney video chat Women & Co. held in late July. She has a point.

For our parents and grandparents, it meant only spending what you earned -- hopefully leaving some financial "wiggle room" for unexpected events like a leaky roof. But as we added credit cards to our wallet, the notion of "living within your means" somehow morphed into "living within your available credit limit" -- at least for some. To regain their financial footing after the Great Recession, many families have returned to the "retro" definition.

Considering the precarious state of our economy, is living within our means good enough?Should we be aiming to live beneath our means, rather than within them? That's the question I, in turn, posed to seven money gurus in my network. "Yes," each enthusiastically exclaimed, and then shared with me their tips for what it takes to live a prudent but fulfilling life:

1. Think of your "means" as a pie, with slices allocated to your mortgage, education, savings, credit card debt, etc. If one slice grows, you have to reduce the other pieces to stay whole.

2. Keep fixed expenses -- mortgage or rent payments, car payments, utilities, insurance premiums, groceries, etc. -- to 50% or less of pre-tax income.

3. Strive to save at least 20% of your after-tax income.

4. With the exception of your home and education, pay cash or don't buy it.

5. Keep your overhead low and stockpile cash for living: save to spend.

6. Be intentional in how you use your money -- spend less on "stuff" and more on what's important.

7. Drop the financial baggage when talking to your kids about money.

For even more smart, actionable advice on living within your means, check out my full article, "7 Expert Tips on How to Live within Your Means Now."

How do you balance your financial needs and wants? What's your benchmark for gauging whether you are living within -- or beneath -- your means?

About the Author:

Linda is President and CEO of Women & Co., a service of Citi that brings women relevant financial content and thoughtful commentary. She also serves as a Managing Director and Head of Digital Partnerships for North America Marketing at Citi. A recognized expert on the topic of personal finance, Linda is also the featured contributor on womenandco.com and Manilla.com, for which she serves as their women and money expert. Her writing, tips and commentary have appeared in countless publications including: Huffington Post, MORE Magazine, American Banker and MSN Money to name a few. She is the recipient of a 2011 Luminary Award from Womensphere® and was the New York recipient of the 2009 Corporate w2wlink Ascendancy Award.