income'—a common malady in this country. I would rank that right up there with the couple that earns an annual income of forty thousand dollars and buys a brand-new, thirteen-thousand-dollar car with no money down. What they've managed to do is drain their monthly cash flow, use borrowed money to buy a non-durable good, and lose thousands of dollars as soon as their investment is driven off the lot. From a financial planning standpoint, that is not smart. Neither, however, is it fatal. Most people, even those I've taught, buy new cars with borrowed money all the time. It may not be smart—but I guess it's fun and, for most, affordable.
"Now, the couple that earns an annual income of forty thousand dollars and buys a brand-new, twenty-five-thousand-dollar car with no money down is just plain foolish. Several people in their twenties and thirties have come to me for financial planning advice. I can't believe the number of young people who want not only to achieve all the goals we've discussed but also to own a beautiful house, a fancy car, and a vacation property—now! They don't need a financial planner; they need a miracle worker! People must live within their means. That doesn't mean they have to scrimp and save every day of their lives, but it does mean they can't spend with reckless abandon. People who live within their means not only are easily able to implement our financial planning strategies, but also lead a much less stressful life.
"Charles Dickens's Mr. Micawber put it best: 'Annual income twenty pounds, annual expenditure nineteen ninety-six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.'" Truer words were never spoken.