Living beneath your means is spending less money than you earn.
If you routinely spend more money than you earn, you will end up with a pile of debt and that can leave you feeling anxious and stressed. Therefore, it is a good habit to always live BENEATH your means.
Unfortunately, many people seek instant gratification and turn to credit cards or loans to fulfill their immediate desires. However, this habit only leads to debt that can take years to pay off and keep you further behind.
If you really want to be in control of your finances and choose where you spend your money, living beneath your means is a great strategy. When you use credit (and cannot pay it off each month), you rely on borrowed money. If you have a hard time paying that back, you are just treading water or even worse, possibly sinking. Live beneath your means and give yourself some space to feel free to make choices regarding where you want to go.
Remember that living beneath your means is not suffering. It is adjusting your lifestyle to be in line with your earnings.
If there is no way that you can spend less than you earn, it will be more difficult.
Below are 5 Tips For Living Beneath Your Means
1. Create a budget
The absolute best way to ensure that you are spending less than you earn is to create a budget. A budget is a plan for where you allocate your earnings. Creating and monitoring monthly budgets does not need to be time-consuming.
Need a budget app? Check out this article that outlines a few budget apps to research.
2. Don’t rely on credit cards
Credit cards are fine to use as long as used wisely. Do not rely on credit cards to purchase anything. We use our credit cards all the time but we pay them off every month. It is easier for us to use the card and we also earn rewards that have served us well. I do not recommend using credit cards if you cannot pay them off each month.
Relying on credit cards to bail you out of an emergency is also not the best strategy. I get it, things happen and sometimes yes, you need to pull out the plastic. However, putting your money into savings for such emergencies would be a more optimal choice.
3. Pay yourself first
I always consider my contribution to savings and investments as a monthly bill. When creating your budget, be sure to include some money for yourself. This is not only money for emergencies or short-term goals, but also fun.
It is crucial to have some fun money set aside or you will find it hard to remain balanced. However, keep your fun budget in line with your goals and your values.
There was a time when we took our family of five to the movies twice a year. We knew many people going weekly and although it sounded like fun we felt that at $100 or more (if we went to dinner), that was just something that did not fit within our budget. Our family grew to look forward to the movies and not expect them and in the end, it worked out well for us.
4. Downsize your home
If your home is causing a burden on your budget, think about downsizing it. If you have not yet purchased a home, I encourage you to find one that fits within your budget.
In some areas, the market is really hot and many people are overbidding by hundreds of thousands of dollars. Before you get caught in this cycle, I encourage you to take a good, hard, honest look at your earnings and decide if it is worth it for you.
The first year of homeownership is always an adjustment with your finances so I stress looking carefully at how important the particular home is and if that purchase aligns with your values.
5. Reduce meaningless spending
There are many areas in our lives where spending can be reduced. Small amounts add up over time so don’t discount your small purchases, especially if they are regular.
Below are a few expenses you might want to look at reducing to ensure you are living beneath your means.
I’ve given my examples for reference.
- Cell phone plans – we went from $280.00 per month for 3 lines to $150 per month for 5 lines when we switched providers and the service has been better. We also have many other perks with our plan.
- Cable TV – we cut the cord with cable, saving us almost $100 per month. Instead, we subscribe to a few streaming companies and honestly, we have not missed cable at all.
- Reduce dining out – we had a habit of dining out quite a bit. We’ve reduced it by half saving us approximately $200 per month. I also reduced going out to lunch at work and opted to bring my lunch. This saved another $160 per month. (I am taking into consideration that my grocery bill slightly increases but it is still a savings)
- Brew coffee at home – we’ve all heard this one by now, but it does add up. I brew my coffee at home and only head out for coffee a few times per month. This saves me about $100 per month.
- Shopping with a list – It is always better when I shop with a list. I am not sure how much I save, but I know that I am either at or below my budget.
As you can see, the combination of all five categories above total approximately $690 per month. That is a lot! And, there are many more categories where we reduced our spending. These were just five I shared!
As you earn more money, you can start adding these expenses back into your life. Or, if you are like me, you realize that you are okay without them and put that money toward something else.
An exercise for living beneath your means
Make a list of all of your monthly expenses and then rank them as to how important they are for you and your family. For the items that do not rank high, ask yourself (and your partner) if they can be reduced or eliminated.
How much can you save? I bet you’ll save more than you thought.
Thanks for reading!
Stay Balanced,
Jill