How To Live Below Your Means
Budgeting Finance Saving || Tags: budgeting, Money ||Since paying off our debt in July, things have not gone as well financially as I thought. We worked for 21 months to become debt free, and once the debt was gone I figured we’d be in an easy place financially to afford whatever we wanted. After all, now we don’t have any debt! Well the last 6 weeks have been an eye opener! With a trip to Toronto that cost a bit more than I thought, and some spending that wasn’t budgeted for, we ended up with less money in our bank account than usual. I like to keep a float in our account that adds up to approximately 5-6 weeks of expenses, just in case something happens to one of us, bills are covered and we don’t have to worry.
Well the past few weeks I have noticed that our account was getting lower and lower. I read an article recently about the difference of living within your means, vs below your means, and I realized that we have been living within, but not really below our means. We have not gone into debt, but we haven’t been saving as much as I want to either.
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Within Your Means vs Below Your Means
You may hear people say to “live within your means” but what exactly does that mean? Technically living within your means can mean living paycheck to paycheck. As long as you aren’t going into debt then you are within your means, however that doesn’t mean you are saving any money. Not spending more than you earn is of course very important, especially to those with financial goals, but where the magic really happens is when you live below your means.
Living below your means requires you to spend less than you earn, but also you don’t need your whole income for your budget; there is money left over for long term and short term savings.
How To Live Below Your Means
Step 1 – Income
First off, you need to know what your means are. Add up your monthly income, and if your income is irregular, then take an average over the last 6 months. As I am self employed my income varies, so I make an income goal for the month, and I know exactly how much I have to work to achieve that.
Step 2 – Budget
There I go again with the B word! You should know by now that I believe that budgeting is your ticket to financial freedom. Start by figuring out your fixed expenses, then estimate your variable expenses. Ideally there would still be 15%- 20% of your income not accounted for which you can add to savings! For more info about budgeting, check out all you need to know in my zero based budgeting guide!
Step 3 – Savings
This is what makes it below, instead of within your means. Saving money every single month will help you in emergencies, help you pay for large irregular expenses, and help you take that vacation you’ve been dreaming about! I suggest making automatic transfers every month to a high interest savings account that you can’t access with your debit card, then you can’t spend it on a whim!
Tips For Getting Started
If you’re having a hard time living below your means, then you’ll either need to increase your income or decrease expenses – or both!
Tracking your spending is absolutely essential to knowing if you are living below or within your means, or maybe you’re spending more than you earn! The only way to know is to do the math.
It’s hard to live below your means with debt dragging you down. Making a debt repayment plan will help you become debt free faster and stay that way.
My bank account is lower than I want it to be, here’s what I’m doing about that:
- Instead of spending all of our paycheck, leaving some in the account so that it builds back up
- Reducing expenses for the next few weeks
- Taking my credit card out of my wallet so I’m not tempted to spend.
Final Thoughts
Hope that helps you understand why you need to live below your means! If you have any questions please leave them in the comments!
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2 responses to “How To Live Below Your Means”
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I agree with the living below your means
We have been doing it for years.
Yes. My husband and I are REALLY working at this over the next few months. We are living within our means, but I don’t want to do that anymore. Thanks for this post to keep me on track!