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 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, seemingly spending lots of money 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 spend money and your enjoyment in life. Leaving you with stress, worry and very little money.
The question is, how to live below your means and enjoy it when you 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 bills when they appear.
Living within your means allows you to save money into an emergency fund, giving you the financial cushion you need if a true emergency crops up.
Whilst living beyond your means results in debt, living below gives you the opposite – debt freedom.
Believe me, having had debt and then achieving debt freedom, the difference is immense! No more debt letters or repayments eating into your paycheck.
The true importance of living below your means is that you are financially stable. Able to make 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.
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 when you run out of money part way through
- Your savings are non-existent and retirement funds are currently 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.
You are spending too much money to fund a lifestyle you cannot afford.
And the only way you can continue to fund this lifestyle is to go into debt. But debt brings it’s own problems because debt has to be paid back.
And it costs more to pay back debt because you have to pay interest as the price for borrowing 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 improvements.
There is no need for you to take on debt to fund these things – how great is that?
You enjoy life, living below your means as a way of life helps you 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.
Related post: How To Love Living Within Your Means Every Day
How To Live Below Your Means
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?’
Your budget is very individual, it only works for you, not anyone else. It will help you save money, get out of debt and show you how you can successfully live on less money.
If you haven’t already got a budget, do not worry, head over to my post on how to budget your money and use the free budget planner to get started.
If your sums don’t seem to work then you will want to learn how to cut monthly expenses as doing this can free up some badly needed cash.
Once you have your budget, the key to living below your means is to stick to the budget you have worked out.
Don’t worry if your first budget doesn’t quite work – it never did for me.
But keep working at it, tweak it a little and it will.
2. Track Your Spending
When you set out your budget you are allocating a certain proportion of your money to specific categories.
The only way you will know that your budget is right is by tracking what you spend.
Keep a note of everything you spend and compare this each month to the amounts you allocated in your budget.
Noting your ending down will give you a great insight into your spending habits, what your weak points are.
Use this insight to tweak your budget 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 Cards
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 your credit cards.
Especially if you have been using them to see you through to the end of the month because you’ve run out of money.
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.
Cash is that bit harder to hand over to the cashier and when it’s gone it’s gone, so it helps you to stick to your budget.
5. Pay Yourself First
Saving money is an integral part of your new lifestyle. Money for your retirement, for emergencies and for irregular bills.
To make these savings you need to do them as soon as you get paid which is why this is called pay yourself first.
Set up automatic transfers into separate accounts for your retirement, for your emergency fund and for your sinking funds (money for irregular but expected bills).
6. Recognize Your Wants Vs Your Needs
What we need in life and what we want are two very different things.
When our grandparents were young they had to focus on what they needed because they had no access to credit cards or loans.
Nowadays we can have almost anything we want immediately, no need to wait to save up, just bung it on your credit card!
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 way to do this 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.
And it goes without saying that spending on your wants needs to be within your budget!
7. Cut Out Mindless Spending
Have you ever looked at your credit card statement 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 remember your spending 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 or less money 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:
Additionally these are some really easy ways you can earn money doing small things every day while at home or waiting in a queue!
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What You Gain From Living Below Your Means
UNDERSTANDING – You gain a better understanding of how to make your money work for you.
Understanding your money, how to stretch it, how to spend it, 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 content 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 able to live comfortably on the money you have.
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.
Is it good to live below your means?
When you are living comfortably within your means, 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 money emergency without going into debt so you don’t stress about the curve balls that life throws you.
Start Living Within Your Needs
The things you should do to make a difference to your money 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 6th May 2021 by Emma