How to Live Below Your Means (In 7 Easy Steps)

No matter how much you make, you can live below your means: you just have to spend less than you make.  If you think this gets easier as you make your money, you’ll be surprised that many people who make a lot of money still live paycheck to paycheck.

Let’s explore some practical ways to make sure you’re living not just within your means, but below them.

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1. Immediately and automatically save some of your paycheck every month

This is the big one.  When you’re trying to live below your means, you have to break the paycheck-to-paycheck cycle.  You must find a way to spend less than you make.

Think about your income ten years ago.  If you’re in a traditional job, you’re probably making much more down due to regular raises.  But many people find that no matter how much they make, they spend it all.   That’s the habit we’re trying to break here.

And the best way to accomplish this is to pretend that extra money doesn’t even exist.  Set up an automatic withdrawal with your bank and have a percentage of your check subtracted every month and put right into savings.  Choosing to save your money is a personal decision that I certainly can’t advise you on.  The important thing is: don’t spend it all.

2. Don’t buy the most expensive house you could get approved for

It is very common advice to buy the most house you can afford.  The logic is that your payment will always stay the same, but your income will increase, so over time, that house will feel more and more affordable.

It makes sense, in a way, if it’s the difference between getting a forever home and a house you know you’ll have to move out of.

But stretching yourself to your financial max can be dangerous.  What if your income doesn’t go up every month?  What if you want to become a one-income family… but you need both incomes for your mortgage?

Beyond the mortgage itself, a bigger house in a better neighborhood comes with lifelong expenses: expenses that are not fixed but will continue to increase.  There’s tax, insurance, HOA dues, maintenance, and utilities.

There’s also lifestyle creep. If you can barely afford to get into a neighborhood full of people who drive 75,000 cars and have lawn services, how are you going to feel if you can’t afford these things?  Over time, you will come to see them as normal and spend your money so you can have them too.

A home is the biggest purchase most of us will make.  And when you want to live below your means, spending the most you can afford isn’t always wise.

 3. Buy used cars or become a one car family

After homes, cars are one of the biggest expenses for the average American family.  And like home, the expense goes far beyond the monthly payment.  You’ll need to pay for gas, taxes, insurance, maintaining a building to park this thing, and of course, repairs.

If you can become a one-car family, all these expenses get cut in half, just like that.

 Of course, this isn’t always possible (although I encourage you to take a long, hard look at it, even if you think you can’t do it at first). 

But nothing is as bad of a purchase as a brand new car.  You can absolutely buy a reliable used car with a warranty and still save lots of money. 

In a year, that brand-new car won’t be brand new anymore.  But you’ll still have the huge payment and insurance bill. 

4. Let the Joneses win

When we’re talking about living below your means, that means you’re going to have some negative peer pressure.  Most people spend almost everything they make.  So you will, by default, be spending less than your friends and coworkers who make the same amount as you.

This might sound great.  In reality, it feels very strange.

If everyone at work lives in the same gated community and you live in an older neighborhood, people might wonder what your deal is.  If you’re a competitive person, you might not like this.   Do people think you make less money than them?  Do they think you can’t afford what they can afford? 

The answer?  Let them win.  

Let them win whatever bizarre overspending contest they’re participating in.  Yearly trips to Europe?  They can have them.  Weekly cleaning service?  They can take that one too.  You’ve entered a different contest with a different finish line.   Just keep looking ahead. 

5. Look at your budget and cut it by ten percent

Human nature being what it is, we have to set limitations for ourselves.  We’ve already discussed automatically saving a portion of your income.  That is great.

Every so often, take a look at the budget you’re working with and cut it again.  Otherwise, you start seeing luxuries as necessary expenses. 

One year, you treat yourself to grocery delivery, and It’s wonderful.  But over time, that grocery delivery just becomes part of the background of your life.  To treat yourself, now you need a frozen coffee drink every weekend.  And a year later, both of those things have stayed, and you need something else.

A regular look at your budget stops this.  If you keep cutting back on things, you keep yourself from continually adding more and more.

It’s not only good for your budget but your general happiness.   Honestly.

6. Take advantage of all the good, free things in the world

Living below your means is just another phrase for not buying all the things you could afford. Not because you can’t afford anything else, but because you choose to. Here are some ways to enjoy life to free.

  • Use the library, even if you could just order every book you want.
  • Borrow tools from friends (be sure to let them borrow yours too, of course).
  • Take the kids to a free public playground, even if you can afford the private indoor one
  • If you have good public schools in your area, send your kids. 
  • Call your agricultural extension to get free gardening advice that’s local

7. Pretend the bottle is almost empty

My grandmother taught me this when she caught me dumping tons of dishwashing liquid into the sink.   She pointed out then when we were running low on dish soap, I was careful with it and used just what I needed.  But when we got a new bottle, I suddenly felt justified in using all I wanted because there was so much of it.

When you start making more money than you need to survive, your bottle seems full.  But that doesn’t mean you go splashing things around and having bubbles everywhere.

So, pretend the bottle is almost empty.  You can apply this advice to so many things.

  • Drive like you’re trying conserve your last quarter tank of gas
  • Take small portions of food and condiments, and get more only if you need them
  • As soon as you get money, give it a job so that you don’t think you have more to spend than you actually do.  (This is the principle of zero-based budgeting, which you can read more about here.)

⭐️ Related: Frugal kitchen hacks to help you save money at home. ⭐️

The heart of living below your means

This doesn’t mean you can’t have a nice house, or go to restaurants, or go on vacation.  It just means that you live like someone making less money than you actually make. 

If you can learn the habit of living on less than you make early, it will be a skill you can take with you your whole life. 

If you need more simple and frugal living inspiration to help you with the everyday details of these principles, you know where to find me.

Wishing you the best.