07 Feb How to Live BELOW Your Means
Have you heard of the concept to “live within your means?” This is the concept that each month you spend less than or equal to the amount of money that you earn. You aren’t racking up credit card debt or going over your monthly budget, but instead, you can comfortably live with the income you have. You can take it one step further by living “below” your means, which will provide you with the ability to save, invest, and become financially free.
Before you can understand how living below your means applies to you, you should take a few moments to better understand your monthly expenses. If you haven’t already, please review our article on How to Calculate Your Monthly Expenses to get a better estimation of what your monthly expenses look like.
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Live BELOW Your Means
To “live below your means” is to have lower monthly expenses than you earn in monthly income; thus, you have money left over to save at the end of every month. If you are living paycheck to paycheck right now, where everything coming in goes right back out each month, you can take these steps to live below your means.
We know that everyone is always saying that spending less is how to save money. Sadly, that can seem easier said than done but it’s TOTALLY achievable. It can be hard to cut back initially, but once you start seeing the dollars add up, you will feel amazing! Check out our article on How to Cut Costs to Become Financially Free to see what you can do to spend less.
What do you do if you have cut and cut and cut costs, but it’s not enough? If you have already cut as many costs as is possible or you are looking for more ways to pad your bank account, you can take a few actions to upgrade your job and earn more money! You can boost your income in a variety of ways, such as asking for a raise at work, taking on more hours, getting a second job, starting a side hustle, house hacking, selling a product, or building a passive income stream. All of these methods can bring more income into your life. What you have to remember is NOT to spend that additional income, but to instead be used in investments or savings plans.
We are sure that you have heard the phrase “keeping up with the Joneses.” This is when people spend money to show that they can, rather than because they want to. It could be as extreme as buying a whole new wardrobe so you can keep up with your favorite Instagram Influencer or as simple at eating at an over-your-budget restaurant because your friends do. Remember that you don’t need to compete with other people financially. That brand-new wardrobe won’t pay off your student loans, and the cost of that expensive dinner could be better used to pay for a week's worth of groceries.
Being yourself may sound cliché, but it not only plays a substantial role in your happiness but also in your finances. Your financial success is your own journey; don’t let outside influences change your story to something you don’t want. If you want to learn how to get over the “irrational and unproductive obsession with what people think of us,” check out this incredible article by Wait But Why.
Stay Independent of Credit Cards
Credit card debt is something that plagues many people, hindering your ability to live below your means. Luckily, you can take steps to stay independent of your credit cards. The first step you can take is visualization. When you are about to make an unnecessary purchase, visualize what the purchase equates to in hours of work.
For example, say that you make $17.00 an hour after taxes. You are about to buy a $200 pair of sunglasses. That means ($200 cost / $17.00 an hour) you are about to spend almost 12 hours of your life to get those sunglasses; that is 10% of your monthly income on a single nonessential purchase! Are they really worth a full day and a half of work? If the answer is no, don’t buy them.
Second, have the mentality of “Save Up” instead of “Pay Off.” Imagine that you have an expensive purchase that you are looking to make, such as buying a new couch. What you DON'T want to do is immediately go out to buy the couch and put it on your credit card, which means that you will have to pay it off with interest. Instead, save up for the purchase. If you are looking to buy that new couch, determine the cost and how soon you need it. Say that the couch costs $1000, and you want it within five months, which means you would need to set aside $200 each month for the purchase of the couch. If you can’t set aside $200 each month for the new couch, consider finding a cheaper couch or waiting a bit longer to purchase it. Either way, you will end up saving money because you are not paying off the interest on the credit card debt if you immediately bought it.
If you are struggling with credit card debt, read our article on How to Conquer Credit Card Debt!
Mix Luxury with Stability
We live in a society that continually advertises an “I want more, more, more” attitude, but that isn’t conducive to a healthy financial lifestyle. It is essential to find activities that allow you to live below your means.
We are not suggesting that you give up fancy dinners, live concerts, or a lovely couch. Instead, we recommend mixing expensive activities with free ones. Replace an elegant dinner with an at-home pizza-making party or instead of another concert, plan a day hike with your family. You can save money without sacrificing your happiness. Many hobbies, activities, and events are both fun and free. You could take up YouTube yoga, host game nights, have a beach day, visit the local library, volunteer, attend free museums, and more!
What is the point of living below your means if you do not have goals in mind to look forward to? You don’t want to blindly save money and just have it sit in your bank account. Create financial goals that will benefit your current life and your future.
The power and success of your goals begins within your mind. Visualize what your goals are; it could be paying off your student loan or saving up for a trip to Europe. Studies show that the more frequently people think about the goals they’ve set, the more likely they are to achieve them. For example, let’s take the same concept we used for staying financially independent of credit cards. When you are thinking of making that $200 sunglass purchase, visualize what would happen if you used that money towards your goals instead. You could be $200 closer to being debt-free or $200 closer to your next trip to Europe. This method will allow you to balance giving up a short-term gratification in exchange for achieving a long-term goal. Using visualization and goals will motivate you to maintain all the actions listed above and set you on the path to becoming financially free.
Once you understand your budget, have taken action to live below your means, and have set goals into place, you also need to find contentment. You don’t want to hate your life or feel like you are missing out because that will not lead to a stable financial lifestyle. Take the time to find something that you truly love in life; this could be painting, running with your dog, swimming at the beach, reading a good book, playing a videogame, or any other plethora of activities. Take that activity, and make sure to include it in your life. Set aside time each day or each week to enjoy it.
Those little moments of satisfaction will improve your happiness and wellbeing, thus making all of this financial action worthwhile. In the words of Oprah Winfrey, “Be thankful for what you have; you'll end up having more. If you concentrate on what you don't have, you will never, ever have enough”
Living Below Your Means Next Step
Now that you are living below your means, you have the ability to invest for the future. Take a look at our articles on the Types of Investing Methods to see what sparks your interest as well as our article on Investment Apps that you can easily use from home!