Spending less than you earn is a good financial move that can give you financial stability. You can still enjoy life even when living below your means. By so doing, you become the boss of your money. You become responsible for your spending, which helps you achieve financial goals and plan for retirement.
In this article, you are going to learn about 10 painless ways to live below your means, and why it is important.
What Does it Mean to Live Below your Means?
The meaning of living below your means is spending less money than you earn. This leaves leaves you with enough money to save after spending your income. It can require you to take actions like limiting your spending and looking for cheaper ways to live below your means.
10 painless ways to live below your means
Looking for ways you can increase your savings and achieve financial freedom? The following are some of the ways on how to live below your means.
1. Cut Meaningless Expenses
One of the best ways to live below your means is to get rid of unwanted expenses. There are many expenses that you can live without and can help you increase your savings. You can avoid expenses like a gym membership, shopping trips, and cable TV and save some money. Go through your expenses and find those expenses that you can live without.
2. Separate Needs from Wants
You also need to separate needs from wants. Needs are the essentials we cannot live without while wants are those things that are important, but we can live without them. Make sure to spend your money only on necessities like food and clothing. Also, be frugal even when spending on your needs.
3. Create a Budget
You also need to have a budget to live below your means. A budget helps you plan your finances well and set limits for each expense. Budgeting also helps you reach financial goals and come out of debt. You need to calculate your income and expenses when coming up with a budget. You can make use of the 50/30/20 rule of budgeting when coming up with a budget.
Related: Why budgeting is important in life.
4. Do Not Compare Yourself with Others
One of the major causes of poor financial moves is comparing yourself with your peers. You need to take responsibility for your finances and spending. As such, you don’t need to buy things that your peers have if you don't necessary need them. For instance, you don’t have to buy a car if you don’t need one just because your friends are driving.
5. Marry Well
Marrying well is directly related to your finances. You need to find a spouse who shares the same financial values as you do. For instance, if you are frugal about spending, find someone who has the same values. Also, strive and find someone who can lift you up financially when need be. For instance, in case of life curvatures like the loss of a job, you may need your spouse to support you stand financially again.
6. Avoid Credit Card Debt
You must get rid of credit cards. It is because credit card debt attracts very high-interest rates and it can easily make you slide into a debt trap. One of the ways to avoid credit card debt is to ensure you pay in cash. If you can’t afford something, don’t slide into debt to have it. Save enough until you can buy it in cash.
7. Live a Frugal Lifestyle
Living a frugal lifestyle is a good financial move. Look for ways you can be economical in your spending. One of the ways to live a frugal lifestyle is by purchasing second-hand items like clothing, electronics, and furniture. Second-hand items are by far cheaper compared to new items. Besides, you can get quality second-hand items at lower prices.
8. Save Money Where Possible
There are many ways to save money you may not be aware of. One of the ways is to make use of discounts and coupons. You can also negotiate rates and bills so that you can pay fair prices. By so doing, you can save lots of costs and this can help you live below your means.
9. Pay Yourself First
To live below your means, you need to pay yourself first. Paying yourself means setting aside money for savings first before spending. Otherwise, you will spend all the money and be left with nothing for to save. Put your savings into an interest-bearing account. You can then use your savings to invest or pay for purchases in cash.
10. Have an Emergency Fund
Having an emergency fund is an excellent financial move. An emergency fund helps you meet unexpected life curvature expenses like job loss and medical bills. Your emergency fund should have enough funds that can cater to your expenses for at least six months in case you lost your job. In case of unexpected financial needs, you can avoid getting into debt since you have an emergency fund to back you up.
Why its Important to Live Below your Means?
Living below your means helps you handle unexpected life curvatures like loss of a job and unexpected expenses like car repair, house repair, and medical bills. Besides, living below your means helps you organize your finances well. The following are some of the benefits of living below your means:
- Helps you achieve financial freedom
- Helps you save money
- Helps you get out of debt
- Helps you build wealth
- Relieves financial stress and anxiety
Is Living Below your Means Worth it?
Yes. Living below your means is an excellent financial move. As a rule of thumb, strive to live at least 15% less than your income. You can then set aside the money you would have otherwise spent in an interest-bearing savings account. This money will be earning interest and help you grow wealth over time.
Related: How to live within your means.
Summary of How Live Below your Means but within your Needs
The above are 10 painless ways to live below your means. Living below means spending less than you earn. It is a good financial move that can help you save money and achieve financial freedom. Keep the money you are left with in an interest-bearing account and let it grow. When you start living below your means early, the better for you since it helps you take advantage of compounding interest.