Imagine that — living an income-based lifestyle!  Some are out there thinking, “you mean I can’t keep spending more than I make”?  That’s right, most of us cannot afford to do that.  The easy consumer credit widely available over the past couple of decades has lured us into thinking that our borrowings are more than covered through value appreciation of our assets – our homes and our stock portfolios, namely.  But now, with the real estate bubble busting and with the Dow generating losses for almost everyone, people realize that the place to come up with spare cash is out of their monthly budgets!  As Roach puts it, “Runaway consumption must now give way to a renewal of saving and investment.”

Such a concept woud not have seemed so novel just 40 or 50 years ago, but our current crisis is now introducing the rest of us to spending less than we make.  This concept may very well be the first and last word on personal finance.  It is the single piece of personal financial advice I give people when they ask me my opinions on personal financial management, and clearly want a short answer.  If they want a longer one…. well, then I direct them to this blog!