How To Live Below Your Means (13 Tips To Save You Money)

Last Updated June 29, 2024 by Davina Kelly

Are you looking for ways to live below your means? You might be wondering how can I learn to live on less, will I have to give up everything I enjoy?

I know it can seem overwhelming, trust me I’ve been there. You can live below your means and still have fun but it won’t be easy.

You will have to change your mindset, form healthy money habits, and be disciplined.

As someone who used to live above their means and be in debt, I will share the best tips to help you live on less and still enjoy the fruits of your labour.

This post is all about how to live below your means.

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Live Below Your Means Definition

The definition of living below your means in simple terms, is when you spend less money than you make.

When you live below your means you prioritise spending money on your essential living expenses and your needs, and you save the rest. You are not living paycheck to paycheck because you have money left over.

Benefits Of Living Below Your Means

When you live below your means you create financial freedom for yourself. This is because it allows you to save and work towards your financial goals like retirement.

It can also reduce stress because you are not having to worry about money. You know that if any unplanned expenses come up, you have a savings pot to cover it. This creates peace in your life.

Things like working towards your long-term financial goals are not daunting anymore because you know that you have money left over to put towards it.

How To Live Below Your Means (13 Best Tips):

1. Create a Budget And Stick To It

When you are trying to live below your means, the first step is to create a budget. A budget is a great tool for your finances, it will help you to manage your money and reach your goals.

A budget is essentially a plan, it will give your money direction so that when you get paid you will know exactly where your money needs to go.

I know creating a budget can seem daunting, but it doesn’t need to be. You can create a simple and effective budget. The formula is simple, income – expenses = net income from your net income you can save, invest, and pay off debt. I have a post that will walk you through the process of creating a budget step by step, you can read it here.

For you to stick to your budget it needs to be realistic, you need to check your progress regularly, and you need to choose the tool that works best for you.

For example, you can budget using an app or you can use your own spreadsheet or planner. I recommend using a spreadsheet or planner, this way you get into the details of your numbers and you can use this information to make improvements.

You can put your budget together using my FREE printable budget planner below

2. Pay Off High-Interest Debt

Eliminating your outgoings like debt repayment is another way to live below your means. Consumer debt such as credit cards, personal loans, car loans, and payday loans come with high interest rates. This makes the debt expensive and harder to pay off. It can also be stressful as it is constantly playing on your mind.

I have been in debt myself, so I know how you may feel. To tackle your debt you can start by making a list of all the money you owe, the interest rate, and how much you can afford to repay.

Next, you need a plan. Some people like to start by paying off the smallest amount of debt first, this is known as the snowball method. Others prefer to pay the debt with the highest interest rate, this will save money as you will be paying less interest (this is known as the avalanche method). Consider your circumstances and choose the method that works best for you.

If you can, I recommend paying more than the minimum amount each month, but if you can’t that is okay. The most important thing is to be consistent with your repayments and be patient.

Before you know it you will be debt free and living below your means.

Paying off your debt will relieve you of stress, give you more wiggle room in your budget, and it will give you freedom. When you are debt-free you will have the freedom to use the money you have left over to save or put towards a goal like saving for a holiday. If you need help I have a detailed guide that will walk you through the best ways to pay off your debt, you can read it here.

3. Set Goals For Your Finances

One of the best things you can do for your finances is set goals. Having a goal to work towards will keep you motivated and it will encourage you to stay focused when you are tempted to spend money on non-essential things.

The most effective way to reach your goals is to make them smart (Specific, Measurable, Achievable, Realistic, and Timely). For example, if you set a goal to save $15,000 that would be too vague.

A better goal would be to save $15,000 in 18 months, by saving $833.33 each month. You can include the amount in your budget so it will be actioned. If you have a budget in place you will know if this amount is realistic. This is an example of a smart goal.

The key to reaching your financial goals is to have a solid plan and live below your means. This way you will have money left over to put towards your goals.

4. Reduce Your Outgoings

One of the easiest ways to live below your means is to reduce your outgoings. As I mentioned earlier the definition of living below your means is to spend less money than you make. But if your outgoings are high this can cause you to live above your means. You need to look at the areas where you spend the most money and see if you can find ways to cut back.

For most people, this is housing costs, food, and transport so if you can find ways to reduce one of these expenses then you will be able to live below your means.

Consider Reducing Your Housing Costs

Reducing your housing costs can save you a lot of money! Be honest with yourself right now, do you have more space than you need? Do you really need the extra room to store your clothes?

Just because you can afford to pay $2,000 a month on rent and live in a bigger property doesn’t mean you should. You can downsize your home or move to another property in a less popular area.

This is one of the most effective ways to reduce your outgoings and live below your means.

Save Money on Food

You can also find ways to reduce your food costs, by reducing eating out and takeaways and shopping within a budget. I used to spend ridiculous amounts of money on food every week because I wasn’t shopping effectively.

Now I take inventory of what I have at home before I go to the grocery store, I have a list, and I shop at cheaper grocery stores. I have a post that goes into ways to save money on groceries, you can read it here. By doing these things you can free up money in your budget to put towards paying off debt or working towards your long-term financial goals.

If you’re looking for a practical way to save money on groceries and cut back on takeaways try out the $5 meal plan.

The $5 meal plan is a meal planning service that sends you delicious meals and grocery lists to your inbox every week for just $5 a month. Each meal only costs $2 – $3 so it’s a great way to save time and money.

You can sign up here and try it out completely FREE for 14 days.

5. Manage Your Finances

Creating a budget is important for your finances, but one of the easiest ways to ensure you are living below your means is to stay on top of your finances.

Set time aside at the beginning of each month to update your budget, this will allow you to see if your budget is working. Make a note of when your bills are due and if you can set them up on auto-pay. Set it up with your bank so that a bit of your paycheck gets saved every month. Implementing these things will simplify the process and ensure you stay on top of things.

6. Avoid Lifestyle Creep

Lifestyle creep is probably the most common reason people live above their means. Lifestyle creep also known as lifestyle inflation is when you earn more money and increase your spending. You tend to start spending more on non-essential items which increases your standard of living.

I have fallen victim to this myself. When I was younger if I got a raise or a bonus the first thing I would do was go shopping and think about all the ways I could spend this extra money.

This caused me to get into a cycle of living paycheck to paycheck and eventually getting into debt because my spending habits increased and I didn’t have any savings. Once I got myself out of debt I vowed to never be in that situation again. Now, I live below my means and save and invest my money.

If you increase your income or pay off debt and have more disposable income it is okay to treat yourself, but you do not need to increase your standard of living. You can adjust your budget to reflect the changes, but your outgoings should stay the same.

7. Adopt A Frugal Lifestyle

Living a frugal lifestyle can help you to live below your means, save money and simplify your life.

Being frugal is not to be confused with being cheap. Being cheap is not wanting to part with your money which stems from a scarcity mindset. Being frugal is about being smart with your money and getting the most value, leading to abundance.

You can adopt a frugal lifestyle by decluttering your home and selling unwanted items, buying your clothes at a thrift store, eating out less, and switching to a sim-only contract. I have a post with more tips on how to live frugally, you can read it here.

8. Track Your Spending

Do you find you are always down to your last $10 before payday? When you track your spending it will allow you to see your spending habits and understand why. Most people underestimate their spending, by tracking you will be able to get an accurate picture.

To get started you can check your bank statements online, I recommend looking at 3 – 6 months so you can get a good picture of your spending habits. For example, you could be spending a lot of money on takeaways and eating out, tracking your spending will allow you to see this and put it into perspective.

With this information, you can make improvements. For example, if you can see that you are spending a lot of money on eating out you can think of ways to cut back in this area. You can go grocery shopping each week and meal prep.

9. Create An Emergency Fund

An emergency fund is like a layer of protection in case of any unexpected changes to your financial situation. It can stop you from relying on credit cards and getting into debt.

For example, if you had any unplanned car repairs, job loss, or unbudgeted payments you can use your emergency fund to cover these costs.

I recommend saving at least 3 months of bills and essential expenses, plus a buffer. You can include the monthly amounts in your budget. But if you can’t afford to put aside a few months of expenses you can save small amounts each month. That is still better than nothing.

10. Increase Your Income

Along with cutting back your expenses, increasing your income is the most effective way to live below your means. Increasing your income will leave you with more money left over to save, invest, and put towards your financial goals.

There are many ways to increase your income, the most common way is to start a side hustle. But you can also consider the options below.

Ask for a raise
Buy and flip items
Sell digital products
Invest in the stock market and generate passive income

The more money you have the more freedom you can create for yourself. It will allow you to increase your savings rate, grow your wealth, and plan for retirement.

11. Give Yourself An Allowance

I am all for living below your means, saving money and reaching your financial goals. But I think it is also important to find balance and enjoy the fruits of your labour.

One of the best ways I have found to live below your means, but within your needs is by giving yourself a personal allowance each month. Think of this as fun money to do the things you enjoy.

You don’t have to deprive yourself and give up everything you enjoy to live below your means. You can still have fun, just do it within a budget. It can be $50 or $100, choose an amount you can afford.

Include this amount of money in your budget each month and spend it on whatever you like. For example, if you enjoy going to the theatre, eating out or getting a massage you can spend the money from your personal allowance. I recommend using a separate card for this allowance. This will help you to separate it from your essential expenses.

12. Change Your Money Mindset

When you are trying to live below your means, one of the most important things you need to do is change your mindset. Everything begins in the mind so it is important to ensure your mind is in the right place.

Don’t focus on the fact that you are living on less or view it as something negative. It’s all about perspective. Learn from your past mistakes instead of beating yourself up about them.

Focus on how adopting healthy money habits and living below your means now can lead to you creating financial independence in the future.

13. Educate Yourself On Money

When you are on the journey to improve your finances it can feel overwhelming, plus hearing the news about the cost of living crisis and inflation can make matters worse. This is why I think it is important to educate yourself on money and how it works.

You need to understand how the economy works, what inflation is, how it affects us, etc. Understanding this will help you make better decisions with your money.

There are many ways to educate yourself, you can read books, listen to podcasts, watch documentaries, or watch YouTube videos from creators with experience on the subject. Here are some of my favourites below.

Books

Podcasts

Earn Your Leisure

YouTube

Nischa
Jennifer Kempson

Netflix

Your Rich Life

I recommend choosing an option that is in line with the way you like to consume information. For example, if you prefer to learn by reading then choose a book.

Frequently Asked Questions

Why Do Some People Live Below Their Means?

Living below your means does have a lot of advantages. Everyone is different so will have different reasons. When you live below your means, you can save a lot of money, you can pay off debt, and you can focus on growing your money and creating financial freedom.

How To Live On Very Little Money?

The easiest way to live on little money is to be clear on your wants and needs. When you eliminate spending money on wants you will cut back on the amount of money you spend. You can also do the following things.

Cancel any subscriptions you don’t need
Negotiate your services like internet, etc
Do beauty treatments at home
Plan your meals
Cook more at home
Shop at cheaper grocery stores

These are all ways you can eliminate costs and live on little money. I have listed some other options above in this post.

Final Thoughts

When you are trying to start living below your means it can feel overwhelming and restrictive. But it doesn’t have to be, there are ways to live below your means and still have fun.

It is important to have the right mindset and focus on the long-term benefits of adopting healthy money habits like creating financial freedom.

If you have a solid plan, stick to it consistently, and practice discipline you will be able to live below your means, save money, and reach your goals.

Have you found these tips helpful? What are some things you are doing to live below your means?