How to Live Below Your Means

Living below our means is one of the most important things we can do as individuals and also as a society. When we live below our means, we are able to save for the future and spend more money now on what matters most to us.

How can you put this into practice in your own life? Keep reading for some helpful tips to get you started to live below your means.

Use cash or debit instead of credit cards so that every purchase is more deliberate and less impulsive. How often do you find yourself buying something on a whim?

How much were those items? How many hours did it take for you to earn that amount of money?

How many hours will it take for you to pay off that item using your credit card at 20% interest over three years? Using cash and debit cards helps us answer these questions and live below our means because we’re not spending what we don’t have.

How Can I Live Below My Means?

This is a question that many people often struggle with. How do we live below our means when there are so many temptations around us?

How does someone achieve lower living standards and yet still be happy? How can you stay happy if you know things will never get better for you because of your current financial situation?

Consider spending less money by identifying and prioritizing what’s most important to you (e.g., food, shelter, education). Make small changes like bringing lunch or snacks from home instead of buying them or skipping that daily coffee run at work.

Cut back on cable TV packages or eat out less often. These are all “luxuries” that many of us don’t even realize we’re currently indulging in.

Change wasteful spending into productive spending by making a list of what’s most important to you and start saving up for it now and take the steps necessary to make it happen, no matter how small they are.

Think about your future self, who will be immensely grateful to you for putting away money every month until the day comes when you finally have enough saved up for what you set out to do.

Living below your means may be easier said than done, but if you stick with it, you’ll be able to achieve your goals one day. It can help you become totally financially free!!

You might also want to read these articles about living more frugally:

How Your Finances Can be Impacted by Living Above Your Means

Spending more money than we make is how many people fall into debt and end up with poor credit. Most consumer debt tends to be from credit cards, so living above means has been a popular approach for decades, unfortunately.

There are many ways to live below your means, though.

One way is by making sure you’re not spending more than 10-15 percent of your gross monthly income on daily living expenses like food and shelter. Which will allow for the other 75-90 percent to be put towards other expenses, spending, and saving.

The key to prevent living above your means is sticking to a budget, limiting credit card spending, and using cash and debit cards for every purchase, no matter how small it is.

If you struggle with budgeting, try some of these budget ideas and tips:

a calculator with some papers and glasses

How to Know You’re Living Above Your Means

If you are unsure if you are living above your means or not, there are a few signs that you can look for.

You Don’t Have Any Savings

If you do not have any savings, especially emergency savings, you are probably living above your means. It will be difficult to plan for the future if you don’t have any money saved up.

You also probably will not be able to afford unexpected expenses like car repairs, an emergency room visit, or a new appliance that breaks down if you don’t have any savings.

You Have Credit Card Debt

If you are putting expenses or other frivolous spending on credit cards month to month without paying off the balance, you are slowly building up a large amount of credit card debt.

Credit cards typically have a very high-interest rate, and if you can’t pay off the balance in full at the end of each month, you will find yourself paying huge amounts of money (what you owe plus extra interest payments) on credit card debt.

If you find yourself in lots of debt, check out some of these articles to help you out:

You’re Spending More Money Than You Have

Some of the most common signs that someone is living above their means are if they spend more than they make, or need to borrow to cover daily expenses (e.g., payday loans).

Or if they use credit cards for everyday purchases rather than cash, live in expensive homes or apartments with high rent/mortgage payments, drive luxury vehicles despite not having the income to afford them, etc.

a calendar with the words "pay debt" on it

How to Start Living Below Your Means

Some people need to take drastic measures like taking out a high-interest personal loan or declaring bankruptcy, but there are other options available before reaching this point.

If you’ve been living above your means for years and have a lot of debt to pay off, it may be time to start from the bottom and live frugally.

Start by finding out how much money you currently spend each month on groceries, fast food, going out to eat, or buying coffee vs. how much you could save by not doing these things.

How much do you spend on electronics per year? How much do you spend per year on clothes (and is this more than necessary)? How often do you buy new clothing rather than shopping at thrift stores?

How often do you visit your local library instead of purchasing new books every week/month/year? How many movies can you rent or borrow rather than buying them or going to the theater?

These are some great questions to ask when getting ready to pull yourself out of debt and start living above your means. The following tips will also help you to get a head start on your new financial journey.

Stick to a Budget

Creating a realistic budget that you can stick to each month is key to being able to start living below your means. This means spending less money on daily living expenses and putting the remainder towards other monthly bills, savings, etc.

It’s important to prioritize your necessities like rent/mortgage payments and utility bills before you put any money towards other expenses.

It may be helpful to create a spreadsheet where you can list all of your financial obligations (e.g., mortgage, insurance, gas bill) along with their accompanying due dates and minimum payment amounts.

Then assign them categories such as “can’t live without,” “important,” “could live without” and so forth to help prioritize what needs to get paid and when.

a woman holding shopping bags with sunglasses on

Cut Down on Frivolous Spending

Although spending money on fun things like entertainment, eating out, fancy clothes, etc., can bring you joy, you need to set a realistic budget for these items and stick to it in order to live below your means.

And honestly guys, most of these things only bring temporary joy! Some of my happiest times ever didn’t cost a dime.

Pay Off Your Credit Cards Every Month

If possible, it’s important that you pay off your monthly credit card balance at the end of each month, so you’re not paying any extra money on interest charges.

If this isn’t realistic, try making payment arrangements with your credit card company to help cut down on the amount of interest you are charged every month.

Once you are paid off, make sure to pay off your bill each month. Credit cards are great for their rewards, but all those rewards aren’t worth anything if you’re paying interest!!

a family putting coins in a piggy bank on a counter

Create Savings Goals & Plan How You’ll Reach Them

If you don’t have any savings or only have a small amount, the best thing to do is start saving now. How much you need to save depends on your specific situation, but it’s smart to set up savings goals.

These goals could include an emergency savings fund, a sinking fund for a fun family vacation, and more. Then you’ll want to figure out how you will achieve those savings goals (e.g., cut down spending, create side income).

Try some of these ideas for saving:

Living as Frugally as Possible

Sticking to a budget and saving money on everyday purchases whenever you can in order to live more frugally will help you to live below your means.

To live frugally, you can cook at home more often (e.g., making your own meals), use coupons or buy discounted or used items instead of new ones whenever possible. You can also lower the temperature of your thermostat during winter/summer seasons to reduce heating/cooling costs and so forth.

Related: How to Get Netflix for Free

a woman shaking hands with a man in an office

Look Into Resources for Financial Help

There are quite a few resources available to those that are in need of some financial help in order to get their finances back on track and start living below their means.

One of these resources includes debt consolidation companies that will help you to negotiate lower payments with companies and consolidate them together into one manageable payment.

There are also companies that offer credit counseling as well as settlement services, debt management plans, and so forth. Just be careful and do your due diligence with any of these companies.

There are also many books and other online resources that can help you to get into a better financial mindset and provide tips to help you start living below your means. You may also want to consider getting a money mentor to help you!

You Can Start Living Below Your Means Today

Living below your means is one of the most important things you should do as an individual, but it’s also essential for our global society to take this approach to being financially responsible if we are to save any money for the future.

Only borrow what you are sure to be able to pay back in full and always prioritize your necessities first before spending money on anything else.

Sticking to a budget and saving money on a regular basis will help you to live more frugally and start living below your means. Using the tips outlined in this article should help you to start living below your means instead of above it!

Do you live above or below your means? Comment below and let us know!