Inside: Ready to learn how to live below your means? Understand why it is important and how to do it. Plus you will love your life and reach financial freedom.
Wondering… what is living below your means?
You are in the right place! You will learn how to live below your means with the best personal finance tips.
Living below your means is simply you have money left over at the end of the month. You’re not overspending money you don’t have. You are living within or below the monthly income.
In all honesty, you are living differently than 95% of people.
It is possible to live below your means. The choice is yours on how to spend your money. Are you going to build a strong foundation with money? Or are you going live on quicksand barely able to get ahead and focused on the next payday?
That is the difference between living below your means or not making it by.
Personally, I took me awhile to understand why living below my means was important. I would spend everything in my account and put off saving for something big or even retirement. Simply put… I was never taught to save. For me, it was a change in money mindset that was a game changer for me.
We sat down, figured out what we wanted in life and how our money goals would get us there.
That meant we needed to live below our means. It was time to live below your means but within your needs.
That meant we needed to live cheap to save money, so we could reach our money goals. For us, living below our means is a lifestyle choice. One that we are okay with because it has opened up many doors and opportunities.
Now is the time for your to start understanding how to live below your means.
Let’s dig in…
Living Below Your Means Definition
What does it mean to live below your means? The definition to live below your means is simple…
Your spending is less than the money coming in.
At the end of each paycheck, there is leftover money. Your expenses are lower than your income.
For many people, this may be a challenge. Society has taught us to spend every single penny we have. Not to save it. Debt is completely acceptable for most people. Here at Money Bliss… debt needs to be paid off in order to reach financial freedom.
In addition, lifestyle creep is a slippery slope most people fall victim to at some point in their lives.
live within Your Means Definition
This is where everything can get a little murky.
Why is it important to live within your means, it won’t help you to make further progress on increasing your net worth.
Just a note… Living BELOW your means is not the same as living WITHIN your means.
- Living WITHIN your means is the same as making ends meet. You have just enough to get by each and every month.
- Living BELOW your means leads to greater things, specifically financial independence and to retire early.
How to live beyond your means is when your expenses exceed your income. This is when debt, specifically credit card debt, can get out of control. This is exactly the opposite of where you want to be.
If you want choices in your life, then stop living within your means or beyond your means. Start saving money and Money Bliss will help you get there.
Now, to answer the question, how do I stop living above my means?
Benefits of Living Below Your Means
Why is it important to live below your means? There are many benefits of living below your means.
Primarily, you are living a life that you can actually afford.
You don’t have to rely on other forms of getting by… debt, living paycheck to paycheck, or borrowing money. Everything you spend money on you can truly pay for. Your income exceeds your expenses.
Also, the amount of stress is way lower surrounding money. That only can be life-saving for your health. There isn’t a constant worry if there will be money left at the end of the month, whether or not you can afford to pay rent, or even buy your special someone a birthday gift.
That leads to a happier life. Instead of being in a negative cycle of living above your means, you are living with less. You are able to find contentment and happiness.
Typically, this leads to accumulating less material stuff. If you are consciously buying less stuff to make sure you stay below budget, then you will have less stuff coming into your house to clutter it up.
Recap – Fabulous Benefits:
- Spend what you can afford
- Less stress
- Happier life
- Avoid debt
- Less materialistic stuff
The benefits are truly fabulous!! Less stress means you can love your life!!
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Why Live Below Your Means
Living below your means makes you self-reliant and self-sufficient.
Through the process of living below your means, you will start accumulating money and then you don’t have to rely on other means.
That is huge!
Most people are struggling financially and are swallowed alive in debt. Since you consciously chose to live below your means, then you are living life differently than most of the population. That means you will be swimming upstream against the societal norm. It won’t be easy, but the benefits greatly outweigh the debt.
It may mean that living below your means to retire early is your mantra.
By becoming self reliant on your own self with money, you are beginning your journey to financial independence.
Not sure where you are in finding financial freedom? Then, check out the 10 Money Bliss Steps to Financial Freedom.
Important Habits when Living Within Your Means
You may be able to live below your means by living on less than you think.
There are important ways to be smart with money, so you don’t run out of money.
To make sure you stay on your financial independence journey, then make sure to do the following things:
Debt free living is one of the cornerstones of financial peace and living below your means but within your needs.
Debt especially credit cards and home equity loans can become a slippery slope when trying to live below your means. The debt can quickly start snowballing within a blink of an eye and putting the brakes on debt is harder once it has started.
Avoid debt like the plague!
Related Debt Posts:
An emergency fund is the backbone of financial security.
Make sure your emergency fund is fully funded. In all honesty, you never want to use it, but it is there in case you do.
This small amount of money set aside will help you avoid debt. This money builds a strong foundation with money.
Rainy Day Fund
Once the debt is gone and an emergency fund is established, then a rainy day fund comes into play. This “bigger” emergency fund, if you want to state it that way, will help you to overcome a bigger financial or personal crisis.
By living below your means each and every day, you are able to easier withstand a job loss or medical difficulty.
Learn more about rainy day funds.
Save for Big Purchases
Obviously, if you are living below your means each and every month, you can’t afford to buy a new couch or replace the furnace in your house. That is where sinking funds come into play.
Money is set aside each and every month to be saved for big purchases.
A rainy day fund helps you live below your means because instead of financing bigger purchases or going into debt, you are able to pay in cash. Simply put, it is the best way to take care of your finances first.
Pro Tip: Even starting to save for Christmas early is a way to help you out.
That right there is huge and makes you different from most of society!!
How to Live Below Your Means
Is it better to live below your means? Yes and will tell you exactly how to make it happen.
Too many times, living below your means sounds like you are withholding money from yourself and not spending a dime. In all honesty, it sounds miserable and like not a whole bunch of fun.
So, how do you live well below your means?
This is exactly how…
1. Know Your Income
The first step to living below your means is to know your annual income. If you don’t know your income, you don’t know how much is available for expenses. Plain and simple.
There are a couple of different places to find your income.
- Salaried employees – Take your last paycheck and find your net income amount. If you are paid more than once during your budgeting time frame adjust accordingly.
- Hourly workers – Look at your pay stubs for the last 3 months. Then, take the lowest paycheck you took home. Use that number as your basis. (It is better to plan for less income than be stuck short.)
- Commission Based, Self-Employed or Freelancers – You are in a tougher spot to know your income. Look at your income over the last two years. Next, take the average monthly income made. Then, shave off 25%. That is your income number to use.
Knowing your income is the baseline to start living below your means.
Completely lost? Check out three types of income sources you need to know about.
Expert Tip: Taxes is a necessary evil that you must take care of. Here is a calculator to estimate that you are withholding enough taxes from your paycheck. Don’t count your tax return as income. Think of it as a bonus with a purpose.
2. Save Immediately
This is how do you budget and live within your means.
If you are serious about living under your means, then this is the first step. As soon as money (paycheck) comes into your bank account, immediately transfer money out to reach your money goals.
Pay yourself first! Save immediately.
That way the temptation to overspend or spend everything in your bank account is limited.
Personally, I like having a separate online savings account from my day to day money. That way the money is gone as well as the temptation to spend because I can see the money sitting in my checking account. In addition, participate in one of the 52 week money saving challenges to help grow your money faster.
In all honesty, we can all live with extra stuff and would be fine without paying for certain services. These are conveniences. In the end, it is a simple way to live below your means. Some people may call it frugal. Regardless of what you want to call it, you won’t be living paycheck to paycheck.
And as you will learn shortly, your savings accounts will come in handy as another tip to living below your means.
Still Have Debt? – If you are still struggling with debt payments, then first create an emergency fund and start tackling your debt ASAP. Then, the extra that you should and could save needs to go to pay off debt immediately. Time to crush your debt!
Budgeting is the act of managing financial resources to meet personal, family, household, and business needs.
It is a process that may involve setting priorities and determining how best to use limited resources to achieve goals.
You need to have some type of system to budget your money. You can use a spreadsheet or one of the best budgeting apps.
The choice is yours.
At the end of the month, you need to make sure you are spending and saving below your income.
4. Make More Money
The first step to making more money is knowing what you are worth. Do you know how much you make per year?
You can find out how much other people have earned in your field by looking at salary information online, but you’re never going to know how much you’re worth unless you ask for a salary review. You might be surprised at what your company is willing to pay, and that can help give you a good idea of what you are worth.
The second step to making more money is to ask for a raise. If you’re not comfortable asking for a raise, then you can use the negotiation tools that your company offers.
In order to save as much as possible, I ended up living comfortably by putting together side hustles. These side hustles were bringing me extra income!
Through them, I could enjoy the adventure to travel and find enjoyment in it.
Resources to Make Money:
Next, you must know what your expenses are in order to live below your means. In this section, we will deal with two types of expenses – basic/mandatory expenses and fun/discretionary expenses.
When living below your means, you must first make sure all of your basic and mandatory expenses are taken care of. The primary needs you need to live.
Then, you get to decide what fun or discretionary expenses are worth staying in your budget or what expenses can go.
Commonly, people blur the line between mandatory and discretionary expenses. Learn about the difference.
In order to live below your means, you must make sure your expenses are less than your income. As well as any saving or giving.
Simply put… Spend (and save) less money than you bring in.
The goal is not to live within your means, but below your means.
6. Steer Clear from Upgrading
Temptation is everywhere. The marketing experts have you convinced that you need the newest and shiniest brand new …. fill-in-the-blank. When in reality you don’t. You may want to upgrade, but you truly don’t need to.
Did you know the cost of upgrading to a new iPhone each time one is released? Don’t worry someone went to the extent to figure out the numbers. You can read it here.
The results are staggering! Upgrading your things and your lifestyle will cause a HUGE HIT to your personal finances (AKA your net worth).
If you want to become a millionaire, one of the millionaire habits is to avoid lifestyle creep.
While on the surface the cost of upgrading most things is minimal (probably under $20), it is the cost of adding up all of the upgrades over a year or many years that the true cost doesn’t help you to live below your means.
Now for the biggies… Your house. Your Car. Those expenses take the biggest percentage out of any household budget percentages. Can you afford those new costs while still living below your means? Are you willing to sacrifice your financial independence to be a slave to a higher mortgage or bigger car payment?
Upgrading comes at a cost, specifically, an opportunity cost of your money making more money.
7. Living Within Your Means & Luxuries
It is important to be mindful of the fact that saving money does not mean living a life without luxuries. In order to live below your means, it is important to think about how you spend your money and how to make the most of what you have.
In order to live below your means, it is important to think about how you spend your money and how to make the most of what you have.
When you are living above your means, you are able to enjoy life less by spending more.
If you don’t have the money for something, it is likely because there is a certain level of impulsivity in your spending habits. You should be aware of this and try to change that habit so that you can live below your means and love life.
10 Simple Tips for Living Below Your Means
it’s not easy, but if you want to live below your means (without having to give up too much), you need to be aware of the basics of personal finance.
You can start by looking at your budget to see where you can cut back. You also have to be aware of what you’re spending. That way you know how much money it’s going to take for you to live below your means.
A lot of people are struggling to make ends meet, but living below your means is not impossible. It might require some sacrifice, but the rewards will be worth it.
The key is having a plan for what you want so when sacrifices come up they don’t feel overwhelming or like too much of a burden.
As you can see from these 10 tips, there are a variety of things that you need to do to start this process.
- Be aware of living your life below the line, and what things cost in relation to their value.
- Get rid of anything you don’t need or use. From old clothes to a wardrobe too large for your tastes
- Think long term. What is your long term vision? Looking for time freedom?
- Buy in bulk, this way you have a supply of items that can last for months to years.
- Be knowledgeable about your money and be aware of what the going rate is in order to get a good deal.
- Be creative when it comes to making things for yourselves, this can be anything from cooking your own food to sewing.
- Buy quality items and research the best price so you get the best deal
- Sell any items you don’t want anymore to recoup some of the money spent.
- Limit unnecessary spending. Try a no spend challenge to kickstart this effort.
- Know what you want out of life.
Is it possible to live below your means?
The choice is whether or not you want to choose a lifestyle that reflects living below your means.
And I’m not talking about wearing shaggy clothes and torn-up shoes, I’m talking about living comfortably yet spending less money than you make.
At the end of the day, it is your choice about how and where you spend your money. This is your journey with money.
Living below your means will open many more opportunities than being in debt. Now, the time to learn how to start budgeting.
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More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
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