In America, a staggering number of people live beyond their means. They spend more than they earn which puts them in debt and handcuffs them to a job for years to come!
If you’re like most people in this situation, you have limited freedom. You’re overspending forces you to work and stress about money. But, if you could live below your means then your financial worries would ease and you’d find some relief!
Living below your means involves spending less money than you earn. As you do it, you create breathing room in your budget which allows you to save. Once you’re saving money, you’re on the brink of a complete financial transformation!
While saving money is one of the primary benefits of living below your means, it’s not the only one. Doing so also provides you with money to cover unexpected bills, like car repairs or urgent medical treatment. Instead of panicking when they happen, you’ll have greater peace of mind knowing that you can handle whatever comes your way!
Most often, people struggle to live below their means because they don’t want to feel restricted or deprived. While you may need to trim some types of expenses, it doesn’t mean you can’t spend on things that you enjoy. Rather, it has more to do with reducing and eliminating the expenses that feel wasteful or are unimportant. In doing so, you’ll regain control of your money and thus your life!
Over the years, I’ve learned that one of the best things you can do to improve your financial situation is to live below your means. If you get this one financial concept right, then it’s only a matter of time before you’ll build the life of your dreams!
Here are 7 easy ways you can start to live below your means!
#1 – Create and Stick To a Budget
How do you expect to live below your means if you don’t plan to? Most likely, you won’t!
A budget creates a blueprint for your income and outlines how it gets spent. Even though the majority of it will go towards your monthly expenses, its primary purpose is to help you save. Once your budget produces savings, then all you have to do is stick to it to live below your means!
One reason people struggle to save is that they cut out too much of their fun money. They reduce and skimp on the expenses that bring them joy, making it difficult for them to stick to a budget.
Besides that, some people budget yet are still unable to save. Most often, they don’t track their spending so they have no way of knowing where they stand. Because of this, they’re more likely to go over, rather than be on budget.
Reviewing your spending won’t just help you limit your expenses and save, either. It can also point out places where you’re wasting money.
For instance, after reviewing your spending you may realize that you have duplicate recurring costs or are spending too much on meaningless expenses. If you were to reduce or eliminate them, then you could live below your means without feeling deprived at all!
#2- Don’t Use Credit Cards
Sure, there are many benefits to paying with credit cards. They’re easy to use, offer protections, and give frequent flier miles or cashback!
Unfortunately, the problem with credit cards is that many people don’t have the financial discipline to use them responsibly. Instead, they tend to buy impulsively and spend emotionally which often bursts their budgets completely!
Research has found that consumers tend to spend more money when they pay with credit cards. One study discovered that consumers may spend as much as 82% more, too! The study also found that credit card users tend to focus on the product whereas those who pay with cash concentrate on price!
It’s also important to realize that purchases made using credit cards are less noticeable than the ones you make with cash. When your credit card gets swiped, you’re not immediately out any money. But, when you spend cash, there’s instantly less of it left in your pocket!
For many people, easy access to credit blurs the lines between what they need vs want. When no physical money gets exchanged, they can justify purchases more easily, regardless of whether they have the money sitting in the bank!
If you struggle to use credit cards responsibly, then consider cutting them up and getting on a cash budget. Not only will this help you realize the amount you’re spending and curb it, but it will help you live below your means, too!
#3 – Pay Yourself First
By now, you’ve probably noticed that making a budget and tracking your spending each month can be somewhat time-consuming. Luckily, there’s an easier way to live below your means as long as you pay yourself first!
Paying yourself first means that you save money before you spend any of it. This way, you’ll save money proactively and it will be made a priority, rather than it being an afterthought!
Also, paying yourself first can be done effortlessly using financial automation. Setting it up ensures that part of your pay goes straight into savings so that you don’t even have to think about it. Besides that, automating your retirement account contributions could be an easy way to earn free money, too!
#4 – Find Inexpensive Ways to Feel Good
Regardless of your money personality, there is an emotional aspect to personal finance. Whether you spend money in excess or stockpile it, you likely engage in the behavior because it makes you feel good!
Today, it’s common for people to engage in retail therapy. Oftentimes, they’ll buy status symbols and other material goods to make themselves feel better.
However, once some people start treating themselves, it can be hard for them to stop. As they buy, their brain starts to connect spending large amounts of money with joy. As this habit takes shape, their splurging may prevent them from living below their means altogether!
Finding inexpensive hobbies and ways to boost your mood will help you live below your means and save. Not only that but spending less on them allows you to experience them more often which improves your quality of life as well!
For example, if you’re a foodie, you probably enjoy trying out the latest restaurants around town. Instead of going out, you could invite friends over every so often to cook a gourmet dish at home. This way, you wouldn’t just have the experience that brings you joy, but you’d also save money and likely build stronger friendships, too!
#5 – Be Grateful
Whether they realize it or not, many people overspend to fill an emotional void. Too often, they compare themselves with their friends, coworkers, and peers which causes them to focus on what’s missing and what they don’t have.
Instead of trying to keep up with the Joneses, learn to appreciate what you’ve been given. Not only will you stop feeling inadequate, but you’ll recognize everything that you have!
Ways to be Grateful
- Keep a gratitude journal
- Volunteer
- Smile more often
- Send thank-you notes
- Find the good in every situation
#6 – Live Off One Income
Many dual-income families base their lifestyle on their total household income. As their income grows, their lifestyle creeps higher which can prevent them from saving at all!
If you live in a two-income household, then consider living on just one. As you do, you’ll reduce spending and your burn rate will fall. Not only will that ensure that you live below your means, but it also provides a windfall of money to put towards your financial goals, too!
For instance, if you can use one partner’s income to cover the bills, then that completely frees up the other’s. Their income could be used strictly to pay off debt, max out retirement accounts, or even build a cash runway!
While living off one income can be challenging at first, the benefits are often life-changing. I’ve worked with several couples who have gone from living off two incomes to one. As a result, their stress levels have fallen and their relationship has grown. Not to mention, they’re building independent wealth at a pace that’s much faster than they would have otherwise!
Living off one income doesn’t just apply to families, either. If you have multiple streams of income, then try living off one. Not only will your savings ratio grow, but you’ll also be on track to achieve financial freedom early!
#7 – Keep Big Purchases In Check
Once your income gets to a certain point, spending on a daily latte probably isn’t going to ruin you financially. However, going over budget on a big-ticket item still can!
For most people, housing and transportation are the two budget categories that need to be kept in check. They alone consume about 50% of the average worker’s pay and that’s before the hidden costs and reserve funds that are needed to maintain these items are ever considered, too!
Today, much like before the 2008 Financial Crisis, people are experiencing FOMO in the housing market. They’re afraid of getting left behind, so they’re making higher offers or ending up in bidding wars. To win, they often have to overextend themselves which turns them house poor!
Besides to that, it’s common for people to spend the maximum amount that a bank says they can afford, too. Oftentimes, this is upwards of 45% of their gross pay. When you factor in other items like taxes and food, it makes it nearly impossible to save. Not only that, but this one decision will also affect their lifestyle for years to come!
To keep large purchases under control, you have to understand the total costs that are involved. That’s not just the monthly payments; it includes the acquisition, maintenance, and ongoing operating costs as well!
Once you have a full understanding of the cost, you can see how it will fit into your spending plan. From there, you can make adjustments and set the maximum amount that you’re willing to spend. This way, you’ll have set a limit and you won’t have to cut spending in other areas to afford it – many of which will make you feel deprived. Instead, you’ll be able to live below your means and thrive!
The key to achieving your dreams is living below your means. Once you start doing it, you’ll save, and by saving you’ll have built the financial foundation that makes everything else you want out of life possible!
Are you struggling to live below your means? Contact Me, I would happy to help you!
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