How to Live Below Your Means

Living within your means – Living beyond your means – Living below your means.

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When it comes to financial health, these are common phrases associated with spending habits and financial security. You control your financial health with your spending, investing, and money management.

…within your means

Are you living within your means by barely making ends meet, having just enough money to cover your basic expenses but no extra?

…beyond your means

Are you living beyond your means, turning to credit cards and personal loans to cover purchases that you do not have the money for?

…below your means

Or, are you living below your means, strategically investing the money you have leftover at the end of each month?

How to make our money go further

With businesses closing their doors, dramatically-reduced interest rates, and the plummeting stock market rapidly decreasing retirement accounts, the global health pandemic caused by the COVID-19 outbreak led to substantial financial uncertainty in America and across the globe.

The US government is working to provide some financial relief to Americans by expanding unemployment insurance, freezing student loan interest, and asking utility companies to extend grace periods for late payments.

Living below your means is a powerful way to save money, giving you the financial freedom and flexibility to handle an unexpected loss of income or emergency expenses. The more money you save each month, the more financial security you have today and for the future.

Tips – living below your means

Here are some tips to help you get started with changing your habits to live below your means.

Know how much you make and what your expenses are

You must know what your income is to be able to live below your means. Your monthly expenses must be less than your monthly income and if that is not the case, then your income or your expenses need to change.

To live below your means, there must be money left over at the end of each month that can be invested for the future either by funding an emergency savings account, making additional debt payments, or going into a retirement account.

Only purchase the things you can afford now

If there is not enough cash to cover the expense today, wait until there is before making the purchase. Avoid relying on credit cards to buy now and pay later. Not only will the purchase have a much larger price tag thanks to the interest tacked on while you are making payments but using credit cards to cover expenses you cannot afford is a slippery slope into financial crisis.

Though using a credit card to earn cash-back or rewards benefits is not necessarily bad, it is too easy to get caught up in overspending and carrying a balance rather than just paying off the account each month to avoid interest. If you must use credit cards, tread lightly and avoid carrying a balance.

Spend money on things that matter

Frivolous spending is a common cause of living beyond your means. Avoid unnecessary expenses and instead, spend your money necessities. This does not mean you need to give up your gym membership or dinner with friends or sacrifice the things that improve your quality of life. But it does mean you should look for cheaper alternatives to your current expenses.

Check Groupon to see if there is a deal on a local gym or workout class that will save you money. Host a potluck dinner for your friends at your home, instead of dining out and be sure to check out the reward programs available where you shop or dine.

Negotiate your expenses when you can

Did you know that interest rates and fees are sometimes negotiable? You may be able to save money by negotiating a lower interest rate or annual fee on your credit card or you may be able to reduce your cable or phone bill simply by asking. If not, shop around to make sure you are getting the best rates on all your expenses.

Reduce your expenses or increase your means

One of the simplest ways to live below your means is to reduce your expenses. Limiting your financial obligations to the basics like food, shelter, transportation, and clothing makes your money go further. If you are unable to eliminate any of your current expenses and already live paycheck-to-paycheck, supplementing your income is the next step. There are plenty of side hustles with flexible hours and pay, so do your research and find the best opportunity to meet your needs.

Stop throwing away money on interest

Save by eliminating high-interest loans and credit card balances. Consider consolidating your debt to reduce the number of balances you owe, thereby reducing the interest that accrues over time. Transferring your credit card balances to a zero-interest credit card is another option.

But make sure to pay down the balance before any introductory period expires and watch out for transfer fees. Refinancing with a personal loan can also mean lower interest rates.

Downsize to avoid waste

Are you paying for a four-bedroom home when you only need one bedroom? Do you have two car payments? How are you budgeting your family’s dual-income?  If you can downsize, do it. Not only will this save you money by immediately lowering your monthly expenses, but it will also save you money in the long run by reducing maintenance expenses, insurance costs, and more.

Consider living off just one salary, even if you have a dual-income household. The second salary will provide financial freedom and flexibility for the family, by helping you to quickly build up your emergency savings account, pay off debt, or prepare for the future.

Living below your means may not always be easy, but the sacrifices made now will be worth the financial stability and certainty this lifestyle creates for the future.


Interesting related article: “What is downsizing?