If you want to achieve financial freedom, then you need to consider living within your means. If possible, you should actually live below your means. It helps you become financially responsible so that you don’t spend more than you earn. You need to live a lifestyle that is sustainable to allow you to save enough for your retirement and invest. You need to be careful about your spending and avoid pilferage.
How to live within my means? In this article, we will inform you about what living below your means is and how to go about it.
Live Within Your Means Meaning
Living within your means meaning is spending less money than you earn. This means that you have enough money to cover your expenses. This helps you become financially responsible on your spending and prevents you from spending more than you earn. Living below your means helps you meet your needs and other financial priorities.
How to Live within Your Means
The following are some of the things you need to do to live within your means.
1. Create a Budget
If you want to live within your means, you need to first know what your means are. You need to look at your income, and all your expenses and then come up with a budget. Get to know what your needs and wants are.
Drop all your wants and focus on your needs. List down all your expenses starting with the essential ones. See what you can live without and get rid of those expenses.
Read more: Why is budgeting important?
2. Track Your Spending
Once you have a budget, you need to keep track of your spending. From time to time, evaluate and see if you are still on track with your budget. Keeping receipts can be a great way to keep track of your spending. See if there are areas you can improve or adjust your expenses.
3. Separate Needs and Wants
You need to separate needs and wants. Needs are the essentials you cannot live without like food and clothing while wants are those expenses you can live without like Tv and cable. Drop all your wants and spend on needs only.
Even for needs, look for ways to lower the expenses. For instance, instead of buying new products, you can opt to buy second-hand but quality. This can leave you with enough money to meet your expenses and leave you with enough to save.
4. Don’t Compete
The other way to live within your means is to avoid competing with Joneses. For instance, your friends could be driving good cars or living in expensive areas. Don’t fall victim to that. If you can’t afford it, don’t even think about it.
There is no use in trying to copy or compete with others. Maybe they borrowed a loan, or they have investments and can afford them to keep up with their expensive lifestyle. On the other hand, maybe you don’t. Living within your means and not competing is advantageous in that it can help you save and invest.
5. Buy in Cash and Avoid Credit Cards
You need to start paying in cash if you want to live within your means. It means that if you can’t afford something, you shouldn’t get into debt to have it. Paying in cash will also help you save up on interest rates. Credit cards attract high-interest rates that can easily make you slide into a debt trap.
If you don’t have enough money to pay for a purchase, it is best you save up enough until when you can afford it. This way, you will develop good money habits and become financially independent.
6. Build an Emergency Fund
To help you live within your means, you need to keep an emergency fund. An emergency fund helps you during unprecedented circumstances like loss of a job. With an emergency fund, you avoid getting into debt to cover up expenses for life curvatures like medical bills.
A good emergency fund should foot your expenses for at least six months. As such, get to know your monthly spending and then save for up to six months. This way, even if you lost your job, you will still be in a position to live within your means.
7. Save Money Where Possible
You need to save as much money as possible where you can. Reflect and see areas where you can save up on some costs. For instance, you can look out for discounts and coupons before shopping. Also, have a shopping list to avoid impulse purchases.
Other ways you can save money include bringing lunch to work, buying second-hand items, and living in the suburbs to avoid costly houses. You can also take advantage of company-provided benefits like contributing to your retirement account and tax relief.
Read more: Why is saving money important?
8. Boost Your Income
You also need to boost your income to live within your means. If you are earning a small income, look for ways you to grow your earnings. For instance, you can start a side hustle business. Besides, you can also think of passive income ideas like blogging, robo-investing, or rental income.
You can also ask for a pay rise, look for a better-paying job, seek financial assistance, or take a second job to increase your earnings.
Why is it Important to Live within Your Means
There are many reasons why you should live within your means. They include:
- Allows you save money for your financial goals
- Cushions you against emergencies
- Helps you to live a debt free life
- Helps you achieve financial freedom and independence
- Helps you secure your future after retirement
Summary of How to Live Within Your Means Without Feeling Cheap
Living within your means is something that requires commitment and financial discipline. To live within your means, you first need to understand what your means are; how much do you earn and what are your expenses. Then come up with a budget and habits that will allow you not to spend more than you earn. By so doing, you develop good money habits that can help you save, invest and achieve financial freedom even with a small salary.