Sometimes people get confused with the phrase “live below your means.” Does that mean you put yourself on a strict budget and coupon like the people on Extreme Couponing? Or do you have to go to the extreme to save money like the people on the show Ultimate Cheapskates?
It’s nothing that drastic, and there are many benefits to living below your means. You don’t have to stress when an unexpected home or car repair turns up because you can save the money you need to live comfortably.
Just the reduced stress of being able to afford the things you need is worth it to make a plan to spend less money. So, here are some helpful financial tips to help you learn to live below your means easily.
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What Does it Mean to Live Below Your Means?
Living below your means is simply spending less money than you earn each month. It’s taking control of your money instead of the other way around, so you have a better life.
Plus, this is valuable financial advice to teach your kids, so they maintain control of their finances too.
When you live below your means, you’re saving for a secure future where you don’t have to worry as much about money, and that’s the secret to long-term wealth.
How to Live Below Your Means
1. Save First
One of the best ways to save money is to have part of your paycheck transferred into an emergency fund, savings, or investment account before you get it. This deduction comes out of your pay automatically, so you never even see it.
One of the biggest money mistakes you can make is not saving money at all! But if you save money out of your paycheck before you even get it, you won’t notice it’s missing.
Most employers and banks allow you to set automated transfers, so you put your savings on autopilot. An automatic transfer helps save time as well. You can essentially set this up once, and it’s done.
Learning how to live below your means and saving money for the future is one of the biggest secrets to long-term wealth.
2. Create a Budget You Can Stick To
Many people shy away from creating a budget because they think they’ll never be able to stick to it. But it is possible to end the cycle of living paycheck to paycheck by creating a realistic budget.
Calculate your expenses and monthly income to figure out what you have to spend each month for each category. While you’re doing this, set some specific financial goals like saving money for Christmas, so you don’t have to use credit cards when December rolls around.
Don’t start with an extreme budget to start with because you likely won’t stick to it. Also, remember you’re not perfect and that your first budget won’t be your last one. You’ll make changes and adjust things over time.
3. Track Your Spending Habits
The next step after creating a budget is to track your spending, so you don’t get off track because that’s easy to do.
You can use a budgeting app like Calendar Budget or Mint or even create a spreadsheet for easy tracking. These apps are easy to use and provide a view of your spending habits.
When you record each purchase, you get a clear picture of your spending habits. And tracking your spending can help you stop buying meaningless things so you can start eliminating credit card debt.
4. Stop Impulse Buying
Impulse buying will kill your budget, especially if it’s a big item. Buying things makes us feel better because when we get something new, it increases the dopamine in our brains.
To stop impulse buying, avoid temptation. Don’t go to the malls or window shopping if you’re an impulse buyer.
If you’re thinking of making a big purchase, wait three days. Unless it’s a dire need, after sleeping on it three nights, you’ll likely find that it’s not that important. If you still want the item, make a plan to buy it.
Reducing impulse buying is a smart financial decision and a way to have more control over your financial choices.
5. Learn How to Negotiate Your Bills
Don’t be afraid to negotiate things like your cable or cellphone bill. You can often save money by downgrading your services. Companies want to keep your business, so they will often help you lower your bill.
Apps like Truebill help you find subscriptions you forgot about, and the concierge will even cancel the subscriptions for you for a small fee. Anytime you can reduce your monthly expenses, it gets you closer to financial freedom.
You can even negotiate your bank rates. Learning how to do this can really save you money. Try calling your credit card company and seeing if they’ll reduce your annual fee or interest rate.
If they aren’t willing to negotiate with you, consider transferring the balance of your high-interest credit card to one with a lower interest. Sometimes there are transfer fees involved, but you’ll save money over time.
Eliminating credit cards with high balances is a great way to lower your credit card debt and live below your means. Learning the art of negotiating your bills also helps you gain more control over your financial life.
6. Downsize Your House
Whether you’re renting or buying a home, downsizing or not choosing a house at the top of your budget is a smart financial move. Although housing expenses are not the easiest places to reduce your bills, they can make a big difference.
Of course, this depends greatly on where you live and the cost of living in that area. Even downsizing from renting a house to an apartment can save you a lot of money. Housing costs in some areas are ridiculously expensive.
As far as buying a house, banks often approve people for houses that seem affordable. But once you add things like insurance, property taxes, and then maintenance, the ongoing cost couldn’t be much higher. So, be smart when choosing a home to buy.
You don’t necessarily need to choose a house that doesn’t meet your needs enough to save money, but don’t be afraid to downsize if you need to.
7. Live Off One Income if Possible
Most families with two incomes don’t learn to live below their means. Their lifestyle choices are based on two incomes. Living below your means for true financial freedom can mean choosing a lifestyle that allows you to live off one income.
Put the other paycheck towards paying off your debt, in savings, or invest it. You could put it in an interest-bearing savings account and make a little extra money on it or in an investment account.
You never know when you may get laid off, or you or your spouse get injured and can’t work. You hope these things never happen, but if they do, you know how to live on one paycheck.
Learning how to live below your means gives you flexibility for life events that occur without warning.
8. Cut Out the Things You Don’t Need
Are you eating out at work every day because it’s convenient, or maybe you have 200+ cable channels? Are you paying for subscriptions that you never use?
Getting rid of the things you don’t need helps you pay your essential living expenses and leaves money for you to buy the things you really like.
One smart tip is to write down the things you truly value and then look at your last few bank statements and see if your purchases match what you value.
9. Don’t Rely on Your Credit Cards to Live
Many of us have had to use a credit card to pay a bill or buy groceries when an unexpected expense comes up. But whenever possible, don’t rely on your credit cards to live a lifestyle more expensive than you can afford.
Credit cards allow you to purchase more expensive items if you don’t have the money to pay for them upfront. That can sound like a very appealing proposition, but leaning too heavily on credit isn’t good, and it can affect your overall credit health. Making too many credit card purchases shows banks that you’re possibly in financial trouble, and it lowers your credit score.
Try to keep credit card usage under 30 percent and only use one or two credit cards to prevent overspending. When you can pay off your credit card in full every month after you use it, that’s a responsible way to use credit cards. And, if you’ve had problems with credit cards in the past, the best thing is to avoid them altogether.
Final Thoughts on How to Live Below Your Means
When you learn to live below your means, you often lead a happier life without stress or fear over money issues. You don’t have to worry about how you’re going to pay for unexpected medical expenses or extra household costs if something breaks.
It takes a conscious choice to be smart about your money so as to build a strong and stable financial future. You don’t need an expensive house or fancy cars to be happy. True happiness lies in a healthy relationship with money, so your family never has to go without.
Great article “living below your means”.
I’m glad you enjoyed it, Vee! Thanks for commenting!
Stumbled across your blog to look at your Elderberry Syrup recipe. It must have been “meant to be” because I am trying to teach my sister (fixed disability income) how to live within her means and stop the overdrafts on her checking account. This article is going to help immensely–I hope.
I’m so glad you found the article, Rose! I truly hope it makes an impact in her financial situation as well.