If you are looking to gain control of your finances this year, one of the best ways to achieve this is to begin living below your means. There are many benefits of living below your means, and it doesn’t mean you have to live a wholly frugal or restricted life.
Whether you are stressed about credit card debt or are simply struggling to keep afloat between paychecks, you’ll find living below your means is one of the quickest routes to financial freedom. “While changing your spending habits may be inconvenient, in the long term, you’ll set yourself up for a better financial path” says Andrew Bryant a credit expert and founder of Credit Weld.
Regardless of whether you are saving for a down payment or planning for your retirement, living below your means can work for anyone. Keep reading to learn more about what it means to live below your means and explore some easy budgeting tips applicable to your life.
What is Living Below Your Means?
Living below your means encourages individuals to spend less than they earn each month. Regardless of your current salary and living situation, this is a tactic that anyone can apply to achieve financial freedom.
By spending less than you earn, you’ll have money left over to put into savings or to invest in your retirement and the future.
A massive misconception of living below your means is that it requires incredibly frugal living. While the two are similar, living below your means doesn’t necessarily encourage you to cut out everything from your life.
Another belief about living below your means is that it’s only for those with a certain income. However, individuals of all income levels can benefit from this way of living.
Regardless of how much you earn each year, if you are spending your whole paycheck, you are no better off than someone earning half your salary.
The recent COVID-19 pandemic has put a spotlight on the necessity of an emergency fund. Many individuals have either lost or had their income reduced during this time and are struggling to make ends meet.
By living below your means, you can begin building savings and securing your finances for the future. This means if an unexpected event occurs again, you can feel secure for longer, knowing you have the funds to support your family.
10 Budgeting Tips for Living Below Your Means
1. Create a Household Budget
To start living below your means, you need to have a clear idea about your current monthly financial situation. At the start of each month, assess what will be coming in and out that month, and find areas you can cut back to save money.
A popular budgeting concept is the 50/30/20 budget. This can be applied to almost any income level and puts aside 50% of your income for necessities, 30% for additional spending, and 20% for saving.
However, to experience the benefits of living below your means, you may want to reduce additional spending and focus on transferring some of those funds into your savings each month.
Budgeting books are also a great way to establish best practices. You can find some of our favorite budgeting books here.
Once you’ve created a monthly budget, track your finances as the month goes on to see how you are progressing.
2. Live on One Income
While this may sound like a huge challenge, this is one of the best ways to start living below your means. You may think this is an extreme frugal living suggestion, but this can benefit almost any family.
Many families with two incomes budget each month based on both of those salaries. However, by keeping the second salary aside instead of adding it into the budget, you’ll quickly be on the route to financial freedom.
The second paycheck can be put aside to pay off any debt or to maximize your retirement fund. You’ll find it easier to cope in the case of an emergency if you don’t have to worry about relying on two incomes as much.
3. Meal Planning
One of the areas we waste the most money nowadays is eating out and take out food and coffees. By planning your meals ahead of time, you can reduce the chance of relying on getting food delivered when you have nothing in the house to eat.
At the start of each week, create a meal plan for the upcoming week. From there, you can head to the grocery store and purchase precisely what you need to feed your family for the week.
This will minimize your need to eat in restaurants and get take out, which you can then save for special occasions in the future. You’ll notice huge savings within just weeks of using meal planning, as well as potentially improving your family’s health.
4. Tackle Credit Card Debt
For anyone with credit card debt currently, this should be one of your critical areas of focus when you begin your frugal living journey.
One of the benefits of living below your means is the ability to put extra money aside each month. Try to start putting this towards your credit card bills as soon as possible to reduce the fees you are paying each month.
The fees and interest on credit card bills can soon add up each year. By getting rid of credit card debt, you can start putting everything you paid off each month into your savings, which will feel much more satisfying.
5. Save for Big Ticket Items
Working hand in hand with paying off credit card debt, we recommend avoiding using your credit card for big purchases. Next time you want to go on vacation or buy an expensive piece of equipment like golf gear, budget and save for this in advance.
Vacations and new gadgets may seem nice at the time, but you need to consider whether they are worth sacrificing your financial freedom for. Living below your means doesn’t suggest never purchasing these items, but you’ll want to budget for them first.
If you are looking to take your family on vacation in six months, divide the cost by months or paychecks. Then, put aside the amount you need each month as part of your monthly budget instead of putting it straight onto your credit card.
One of the key components of frugal living is searching for discounts. When shopping in your grocery store, try to see if there are any coupons for items you have on your list to buy.
Every time you shop online, perform a quick search to check for online discount codes, or use a site such as Coupon Cabin.
You’ll also want to consider using a cash back site for your purchases, like TopCashback. You’ll receive a small percentage back on most purchases, which you can put straight into your savings.
7. Financial Courses
One reason many people neglect their finances and get into debt is they lack education surrounding financial matters. By educating yourself via free online courses and websites, you can begin to make smarter financial decisions.
Your bank may be an excellent place to start for information, especially regarding your accounts and credit card. From there, you’ll also want to consider finding a personal finance site that resonates with you.
There’s no need to pay for courses online anymore, and you’ll find a wealth of information for free on the internet. By educating yourself more about making wise financial decisions, you’ll see the benefits of living below your means.
8. Cut Transportation Costs
Along with food costs, transportation is another area to quickly save money when living below your means. If you currently use your car to go everywhere, consider if you could walk or cycle to work each day.
For families that run two cars, you may even want to consider if you could drop down to sharing one car between you. While this is not suitable for everyone’s situation, it’s an excellent way to start living below your means.
If you have sound public transportation systems in your city, this can also save you money throughout the year instead of running a car.
9. Increase Your Income with a Side Hustle
If the concept of frugal living is a struggle for you due to not having a significant income, consider increasing your income with a side hustle.
Nowadays, there are hundreds of opportunities to make money online, whether you want to use a freelancing site or sell crafts on Etsy.
Another easy way to make additional money as you start living below your means is to clear out any unwanted items and clothing from your home. You can easily resell these online, giving you the spare cash to pay off your credit card or save for big-ticket items.
10. Build a Minimalist Wardrobe
Buying new clothing and accessories each season can be a massive drain on your finances. There’s no need to feel like you need to keep up with the Joneses, and instead, you should focus on building a functional wardrobe.
Consider taking part in a minimalist fashion challenge, such as Project 333. You’ll soon see that a smaller wardrobe doesn’t have to be less fashionable.
When buying new items of clothing, choose neutral colors and styles you can wear all year round. Then each season, you can add a few new pieces to refresh your wardrobe for the months ahead.
Our friends at Porch.com wrote a great article where you can find Easy Tips and Home Projects to Help You Save Money. They provide money savings tips you can apply all over the house.
5 Benefits of Living Below Your Means
1. Reduce Your Debt
One of the most significant benefits of living below your means is the ability to reduce or eliminate debt much quicker. Debt can be a huge source of stress for adults, and the faster you get rid of it, the sooner you can begin saving for your future.
There are so many fees associated with debit and credit cards, so the sooner you begin tackling them, the more money you’ll free up each month.
Debt can also harm your credit score, which can be a roadblock for anyone trying to buy a house for the first time.
2. Reduced Stress Levels
One of the biggest causes of stress nowadays in most households is finances. Couples often find themselves arguing about their financial situation, which puts more pressure on their relationship.
Using a monthly budget, you’ll know where every dollar is being spent each month, which can reduce arguments over who spent what.
If an emergency situation does arrive, you’ll also feel calm and confident knowing you can tackle this situation thanks to your savings and future planning.
3. Plan for the Future
Regardless of your age, it’s never too early to begin planning for the future. By putting aside money each month now for your retirement, you can start to feel secure knowing you won’t have to work later in life.
If you have young children, you’ll want to consider starting a college fund early on in their lives. College is a considerable expense for teenagers and parents alike, so the earlier you start saving, the easier that period of time will be for everyone.
Living below your means allows you to set yourself up for future financial freedom, so you don’t have to worry about your job security or any unexpected disasters every day.
Once you’ve cleared your debts and started living below your means, you’ll find you have greater freedom in your life. You’ll no longer feel as reliant on your job and instead can consider pursuing your passions if you so desire.
You’ll also find you have additional money left over to enjoy the nicer things in life, such as vacations or upgrading your home.
5. Improved Mood
As well as reducing stress, living below your means can make you and your family have a happier life. You can live in alignment with your values and spend your money on the things that are most important to you.
Many individuals who adopt frugal living notice the benefits to their mood within just a few months. Having heaps of belongings in your home can cause so much stress, and by reducing the amount you consume, you’ll focus on what’s important in life.
By living below your means, you’ll likely spend more time together as a family and begin focusing on what matters.
Wrapping It Up
Living below your means can be applied to anyone’s life, regardless of your age and current income. You’ll find there are so many benefits to living below your means, and you’ll soon notice you feel reduced stress levels and a more positive outlook on life.
Creating a household budget is the first step to success, so you can assess your current situation and work from there to begin your journey. While it may take a little adjustment at the beginning, you’ll soon notice the results.
Reducing your debt can help you start planning for your financial future and retirement. The long-term freedom you’ll gain from living below your means is worth the initial sacrifice, so start applying these tips to your life today to take control of your finances.
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