If someone asked me what the one best piece of advice or tip to financial success is, I would say that it is the act of living below your means.
But what does living below your means even mean? To put it simply, no matter if you make $30,000 a year or $300,000, the most important thing you can do is live below your means and to not spend more money than you earn or take in.
Living below your means can sound scary or uncomfortable. But what’s even more dangerous than living below your means is spending more than you can afford and ending up in debt.
Why do we usually end up spending more money than we can afford? Is it to look cooler to our friends, to impress other people, or because we feel good buying expensive things?
Whatever your reason may be, living over your means probably isn’t helping you out much financially.
Of course, it is easier said than done to live below your means. We live in a society that values material possessions more than anything and we assume that people have more money than us based on what they wear, drive, and where they live.
Now that you know what living below your means is, let’s explore why it doesn’t have to be miserable and five ways to live below your means successfully.
Five ways to successfully live below your means:
- Focus on everything you have, not everything you want.
- Stop comparing yourself to other people.
- Be creative and innovative with your money and ideas for gifts.
- Create a solid monthly budget and stick to it.
- Cut back on silly spending.
1. Focus on everything you have, not everything you want
Living below your means starts with the right mindset.
If you are struggling financially or worried that you may soon run into financial issues, living below your means is the best place to start.
An excellent way to practice a positive money mindset is by focusing on all the things that we have in life versus the things we want to have.
The things we have and want vary from person to person, but the idea is the same. No matter how much we have, we will always want more, and there will always be someone above us who has those things.
When I get into a frustrating pattern of being mad about the things I don’t have, I find that the best way to get out of it is by writing down all that I am grateful for right in this very moment.
The word gratitude comes from the Latin word gratia, which means grace, graciousness, or gratefulness. The act of gratitude is physiologically proven to be a way to cultivate more happiness in your life.
Aim to come up with 10-15 bullet points, but just a few will get you started.
2. Stop comparing yourself to other people
The second best way to successfully live below your means is to stop comparing yourself to other people.
“Comparison is the thief of joy”
Theodore Roosevelt
Theodore Roosevelt put this best – comparison is the real thief of all our joy and happiness.
If you want to live below your means and afford only what you can, you have to stop comparing yourself to other people! I am guilty of this too. We have gotten into a bad habit from society to want everything we see or don’t have.
But to live a happy and financially comfortable life, we have to realize that buying more things won’t produce happiness or make us any happier than we currently are.
To stop comparing ourselves to other people all the time, it takes conscious work and mindful thinking, like the gratitude journal above.
Yes, money is essential. But money will never buy us true happiness if we always think we need more and more of it.
If we continually compare ourselves to other people, we will always feel discontent and envy.
3. Be creative and innovative with your money and ideas for gifts
A fun way to start living below your means is to tap into your creative juices. Since it is getting close to Christmas, you may want to give your friends and family gifts without breaking the bank.
Now is the time to get creative with gifts! If you have never made a gift yourself, maybe this is a good time to try. DIY (or do-it-yourself) gifts are a fun way to make gifts at home for other people.
Most of the time, people love homemade gifts and feel a great sense of appreciation for the time and energy you put into making them – the amount of money you spent does not matter!
If you aren’t very crafty, no worries! There are other easy ways to give gifts. Some other ideas include spending time with a loved one via phone or zoom or baking a yummy batch of cookies for a friend.
4. Create a solid budget and stick to it
The best way to know what you can afford is to start by creating a budget that you can follow.
All budgets look different for everyone, but a budget is just an outline of your spending versus income to understand the range of what you should be spending in a particular time frame.
If you are wondering how much you should be saving versus spending each month, feel free to check out my article on learning a quick and easy money rule here.
If you don’t want to create your budget and write it out manually, there are plenty of free budgeting tools and websites to help you budget.
5. Cut back on silly spending
After you figure out your budget per month, cutting back on spending is a significant next step.
Once you actually figure out what your spending needs and wants truly are, you will be able to get super specific on your “silly” spending habits.
For me, silly spending is on many Amazon products that I don’t need and alcohol (oops, I do love wine!)
What are the benefits of living below your means?
At this point, you still may be wondering what the benefits of living below your means are. And that is okay! The idea of living below your means may not come naturally to you, but there are some great benefits if you decide to follow the path.
Living below your means starts with being comfortable with actually saving money. The top ten reasons why you should consider practicing helpful saving tactics to live below your means include:
- Life can be unexpected
- It takes time to save up for big purchases
- Saving can teach you self-discipline
- Saving money can ensure you prioritize what you need
- To do more fun things in the future
- To be less stressed out (and to feel more content with your life)
- To be able to give to and help others more freely
- Saving helps avoid debt
- Saving for your education or your family’s education
- To travel more (post-pandemic)
If you are interested in learning more on how saving money relates to living below your means, check out my post titled “Why Is Saving Money Important: 10 Benefits of Saving Money and More.”
What is the 30-day rule in terms of money?
Since saving money is a crucial element if you want to live financially sound, the 30-day rule is a quick little way to understand if you truly need to buy something or not.
Simply put, the 30-day rule requires you to think about purchasing before you do it.
Of course, not all purchases will need or can be contemplated for 30 days, but these are for the purchases that you may be on the fence about buying or that you feel “impulse” to purchase right then and there.
If you aren’t sure if you should go ahead and buy that item you’ve been thinking about, I challenge you to say no to it and THINK about it for 30 days.
Do whatever you need to do to reflect on it, but the easiest way is to write it down with pen and paper and be as specific as you can be – the price, service, location, and how many times you’ll use that item.
If you still think about it for 30 days, go ahead and buy it if you can afford to purchase it. If not, recognize that this purchase may not be as necessary as you think and that you should save that money instead.
Some good living below your means quotes to get you going:
- “Just because you can afford it doesn’t mean you should buy it.” -Suze Orman
- “Whatever your income, always live below your means.” -Thomas J. Stanley
- “He who buys what he does not need steals from himself.” -Swedish proverb
Final Words
Living below your means is just a nice phrase to reword that you should not spend more money than you make.
It may be difficult not to spend more than you make at first, but you will be able to master it with time and practice.
Living below your means is less about being a penny pincher and more about acquiring a great habit of saving and spending in a reasonable way that will allow you to live your life without a financial burden.
When you can live below your means, you will always be rich!
Living below your means is a practice that takes time but will be a great new habit to start and stick to for life.
Ashley is a finance graduate from the University of San Francisco and currently works at a financial technology startup in San Francisco that is focused on providing affordable and accessible 401(k) retirement plans to other startups and small businesses. Prior to working at a startup, she was an associate at a large private wealth management firm working with high-net-worth clients. She is born and raised in Orange County, CA, and loves spending time at the beach, in a pool, reading, and with her friends.
[…] If you are interested in learning more about how to live below your means, check out my post “Living Below Your Means – 5 Ways to Successfully Do It.” […]