Do you feel like you just can’t get ahead with your finances? You’re not alone. There’s a solution – live below your means. While it’s simple in theory, putting it in practice takes discipline. But it’s so worth it.
We were constantly having to go into our savings to transfer money and there was just a gut-wrenching feeling because I didn’t know where the money was going.
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Basic Framework to Live Below Your Means:
- Spend less than you bring home
Benefits of Living Below Your Means:
- Be or get debt free
- Reduce financial stress – more prepared for unknowns of the future
So, now that we know the basics and why it’s important to live below your means, let’s walk through the practical application.
How to Live Below Your Means:
1.Know what your take-home pay is
If you get routine checks this step will be easy, however, if you’re income is not regular, you’ll need to make some good estimates here.
One question to take into consideration include is your income seasonal?
Is there an indicator that will help determine what your payment will be?
Do the best you can to determine what it is from answering the questions above to looking at history.
2. Make a budget
This is a scary concept for many, but it doesn’t have to be. A budget is just planning where the money will be allocated to. You decide what’s best for you.
Can you include money to eat out? Yep…you can even include a category for vacation. It does have to fit in the budget, which means you’ll need to reduce another expense to make it all balance.
Not sure how to figure out what to estimate for expenses? History is the best place. Pull out the bank statements and credit card statements to see the details for the last few months. What new expenses have occurred that need to be factored in?
There are many ways you can make a budget – from using budget apps to everything on paper.
I’ve tried several apps and while they are good, I prefer to use an excel spreadsheet. There’s no right or wrong answer. It’s whatever works for you.
Here is the budget sheet I use if you want to try it out.
This budget template has been a huge help to me.
3.Track your expenses
You can’t just set a budget and forget it. You’ll need to update the expenses. While the fixed expenses will match like mortgage or rent payments, other expenses like groceries or electricity will vary. Keep adjustments the expenses so that the bottom line is zero.
4.Set aside some money to save each month
This money will go towards completing your emergency fund. It’s not a matter of “if” something happens, it’s “when” something occurs that needs to be fixed.
5.Don’t rely on your credit card
Credit cards have high-interest rates and it’s best not to put expenses on your credit card if you can’t pay it off 100% at month-end, it should not go on it.
Using the cash envelope system makes spending more difficult. It’s harder to let go of that earned cash versus swiping the little plastic card.
To learn more details of how to use Dave Ramsey’s cash envelope system, read here How to Set Up a Cash Envelope System.
There’s no right or wrong answers here. It’s whatever you can reduce and based on what your priorities are. There may be an expense that’s easy for some families to reduce, but very important to you, so you need to find another one.
Some of the largest expenses include rent or mortgage. It’s a fixed amount so it can’t be flexed downward for the month. However, if you’re struggling to make ends meet with the bills, are you living above your means in a house that may not be right for you at the stage of life you’re currently in?
Can you scale back on the size of your house?
Another fixed large expense is generally for vehicles. It may be necessary to get a cheaper car to make it easier to live month to month paying bills and paying off debt.
Do you have any subscriptions that you’re not using? Perhaps to the gym or magazines. These may be an easy area to reduce expenses.
This is an easy expense category to flex. If you need to buy something, try a Thrift Shop or use accessories to make what you have already go farther.
Eating out was always a big expense for me and it added up quickly. I was embarrassed when I added up what we spent for our family of 4 for a month. While I enjoyed the food and not having to cook or clean up, it was certainly not a good use of our money. Once we cut back, it made it a special treat to eat out and saved us money.
Part of being able to reduce this category is having quick and easy items to cook at home, especially if that’s not what you enjoy doing (like me).
I put together quick and easy meals with chicken that will help not eat out and save money.
You can get it here for free. Quick and Easy Chicken Dinner Ideas
This is one of the easiest expenses to be able to reduce.
These particular things along will help reduce expenses here.
Meal Plan – if you’re not sure how to do this, check out this article about How to Meal Plan.xxx
Use a list when you shop
Use Coupons – electronic ones, or paper ones. This article here goes into more detail about coupons: Beginners’s Guide- Couponing Tips
I’ve earned over $50 so far and could earn more if I remembered to use it more.
I just used Rakuten to order something for my dog that I would have anyway and earned money. I love getting my checks from Rakuten.
You can live below your means and still live well and not feel deprived. Having really tightened our belt with a budget and intentionally planning where our money went, we are now debt free. And it feels amazing. It does take discipline, but living under your means can be done.
I know you can do it too.