Living below your means basically means spending less money than you have coming in each paycheck. Sounds super simple right? And it is, if you can ignore all the demands on your money.
Unfortunately life can get expensive real quick with high living expenses such as housing costs, car payments, so many household bills, gadgets, lunching out at work and so on.
And as your salary increases, so too does your lifestyle costs. You see people around you, buying big ticket items and having a fun time, naturally you are going to think “I want some of that”.
But “that” comes at a price when you don’t have enough money and the price is debt.
And long term, debt kills your ability to achieve financial security and your enjoyment in life. Leaving you with stress, worry and not enough income.
The question is, how to live below your means and enjoy it when you are used to spending everything you earn, and probably more?
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The true importance of living below your means
How to live below your means might sound super simple but it’s the results of doing so that matter so much.
Not spending all your paycheck means you have money to pay for surprise expenses when they appear.
The wisdom of living below your means is that it allows you to save money into an emergency fund, giving you the financial cushion you need if a true emergency crops up.
Whilst living above your means results in debt, living below gives you the opposite – financial freedom.
Believe me, having had debt and then achieving financial freedom through living below your means to retire early, the difference is immense! No more demanding letters or repayments eating into your paycheck.
The true importance of living below your means is that you are financially sound. Able to make personal finance decisions based on what needs to be done, not what you can afford. Retirement accounts can be funded, peace of mind is found and financial emergencies covered.
It is said information and knowledge is power. When you learn about money you can banish the fear. These are my favorite personal finance books that will increase your knowledge profoundly.
How Do You Know If You’re Living Beyond Your Means?
Let’s be honest, we both know when we are living beyond our means, don’t we? We can fool other people but we can’t fool ourselves, not deep down.
There are 3 very clear signs of when you’re living beyond your means:
- You use your credit card to get yourself through the month because you have run out of money
- You have no emergency fund as every month is an emergency
- Your savings account is empty and financial independence is just a pipe dream.
When you are in this position it is down to your spending habits and your lifestyle. Being brutal, you have fallen into the trap of lifestyle creep.
The only way you can continue to fund this lifestyle is to go into debt. It costs more to pay off debt because your monthly payments include interest as the price for spending money you didn’t have.
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The Benefits Of Living Below Your Means
Living beyond your means is not fun, it causes stress and worry, and debt can back you into a corner.
The benefits of living below your means mean that all that stress and worry goes away.
You no longer have to worry about money. Because you have money in the bank and are not one paycheck away from a financial disaster.
You have no debt – and let’s face it, this is huge!
According to the Office for National Statistics, UK household financial debt rose 11% last year.
When you have no debt, all the money you earn, you control.
With no debt repayments you are not losing money by paying out interest.
You have money set aside for not only emergencies but also for your retirement and for fun things like a vacation and future home improvement expenses.
There is no need for you to take on debt to fund these big ticket items – how great is that?
You enjoy life, living below your means as a way of life will help you live with less stress and be content with what you have.
Instead of hankering after things that other people seem to have.
People might have more things but what you don’t see is their debt and the worry this can cause.
living below your means tips
1. Stick To Your Budget
Booo – I started with a budget. Sorry about that, but your budget will help you answer the question, ‘how can I live on less money?’
If you haven’t already got a budget, don’t worry, head over to my post on how to budget your money and use the free budgeting planner to get started. It will help you to live on your take home pay, reduce monthly expenses and show you how you can successfully live on less.
If your sums don’t seem to work then you will want to learn how to reduce monthly expenses as doing this can free up some badly needed income.
Once you have your budget, the key to living below your means is to commit to spend money as you have planned and spend less than you did before.
Don’t worry if your first step in budgeting doesn’t quite work – it never did for me.
But keep working at it, tweak it a little and it will.
2. Track how you spend money
When you set out your budget you are allocating a certain proportion of your income to specific categories.
The only way you will know that your budget is right is to track how much money you spend and on what.
Keep track of everything you are paying out for and compare these expenses to the amounts you budgeted for.
Noting everything down will give you a great insight into your spending money habits, what your weak points are.
Use this insight to tweak your budgeting categories and get to know yourself better.
3. Know Why You Want To Live Below Your Means
This may seem pretty obvious but to be successful long term in changing your spending you need to really know WHY you want to do this.
For example – I was frugal for a long time because I HAD to be, it certainly wasn’t through choice.
And any time I got more money I spent it.
4. Don’t Rely On Credit
Credit cards make spending so very easy.
Too easy though.
Too easy to overspend as you don’t see the money being spent until you get your bill at the end of the month.
You need to give up your reliance on the plastic.
Especially if you have been using them to see you through to the end of the month because even living paycheck to paycheck isn’t working.
If using your credit cards has become a deeply ingrained habit then I would encourage you to use the cash envelope system for a couple of months.
When you pay cash it’s that bit harder to hand over to the cashier and when it’s gone it’s gone.
5. Pay Yourself First
When you stop living above your means your financial outlook will improve. You’ll have extra money to save towards your financial goals, for emergencies and for irregular expenses.
To make these monthly savings you need to do them as soon as you get paid which is why this is called pay yourself first.
6. Recognize Your Wants Vs Your Needs
What we need in life and what we want are two very different things.
We can have almost anything we want immediately, no need to wait to save up, just bung it on the plastic!
And having instant access has blurred the lines between what you actually need and what you happen to want.
Get rid of the blur and start focusing on what your needs are and what is just a want.
An easy first step is to delay buying anything for a while to see whether it is a want or a need.
You can use the 30 day rule, or if that seems too long right now then try to wait at least 72 hours.
7. Cut Out Mindless Spending
Have you ever looked at your bank and card statements and not even remembered some of the transactions there?
Or drawn out some cash and have no recollection of spending it?
Tracking your spending will help you to track costs but won’t stop you from spending mindlessly.
Mindless spending is buying because you can, because you’ve seen something you think you might like, because it’s a ‘bargain’.
Because you’ve always done it.
Spending without giving thought to how you could get the same thing for less.
Turn mindless spending into conscious spending. Ask yourself:
- Do I need it?
- Could I get it another (cheaper) way?
Lunch and coffee are classic examples.
You can pack your own lunch and bring your own coffee (I always have) but you have to give a little thought to it.
Pack your lunch in advance, get yourself a hot drinks flask.
And of course don’t give into temptation when a colleague suggests lunch out.
8. Make more money
Sticking to your new budget is not always enough.
Especially if you are trying to live on one income because times are difficult.
Going out and getting another job outside your home might not be possible or practical but there are things you can do at home to make money.
These posts have some great ideas on money making hobbies and flexible work from home jobs:
is Living Below Your Means worth it? What you gain
UNDERSTANDING – You gain a better understanding of new ways to live on just your take home pay.
Understanding your money, how to stretch it, how to cut back, how to make it work for you. This is key to your success in being able to live below your means.
CONTENTMENT – accepting how far your money goes and sticking to your budget helps you to gain contentment from what you have. Not forever wanting what you haven’t got.
CHOICES – you get to make choices about how to live your life without money (or lack of it) being the decider.
SLEEP – no more sleepless nights worrying about how to pay an unexpected bill. You have got you covered.
COMFORT – being comfortable with your financial situation.
BECOME RICH – yes, you can get rich by living below your means! Maybe not billionaire or millionaire rich. But rich in terms of having more than you need to live on.
What about needing to be living below your means in retirement?
If your retirement budget is small, there are still ways to live on less through following advice and tips aimed at more mature people. Check out my this post of mine for more retirement money savigin ideas: 20 Frugal Living Tips For Seniors
Is it good to be living way below your means?
When you are living far below your means (very comfortably under budget), you might not be in a mansion or having lots of exotic holidays but you enjoy what you have and are not worried or disappointed with what you haven’t got.
That’s got to be good, right?!
You are not constantly looking at people around you and thinking you should have what they have.
They will have debt and you DON’T want that.
You have enough money for your needs and a little for your wants. You can cover a financial emergency without going into debt so you don’t stress about the curve balls that life throws you.
get rich by living below your means
The things you should do to make a difference to your financial situation are all within your control.
You can live below your means but within your needs when you take action to reduce your expenses and accept your life for what it can be.
Enjoying your life with what you have is the best step forward you can take.
Don’t hanker after what others have, focus on you and your family and what you truly need.
Love the life you have.
For more help in loving your new life and tips to help you save money have a read of these posts:
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Last Updated on 15th January 2022 by Emma