Discover the secrets to living below your means, possibly the most important thing you can do to secure your financial freedom.
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To attain financial freedom, there are many things you need to do: improve your financial literacy, have a solid financial plan, save money, make more money (online, with a new job or through a side hustle), pay off debt, and stay out of debt. But to succeed in all of these, you first need to master the secrets to living below your means so your numbers are always in the green.
Patti Henry is an Occupational Therapist, wife, mother of two, and blogger. Along with her husband, Jason, she created Our Life On FIRE, which focuses on their family’s journey to financial independence.
She is dedicated to educating and inspiring others on how to live a meaningful life full of purpose and intention. When any free time presents itself, she can usually be found cooking, reading, hiking, and traveling. You can connect with her on Pinterest and Facebook.
Living below your means is one of the secrets to gaining financial freedom. Whether you are ready to get rid of debt or stop living paycheck to paycheck, living below your means is the answer.
Getting control of your finances is one of the best things that you can do for yourself. Once you make the decision to stop letting the stress of money control you, you will automatically start living a more blissful life.
What does it mean to live below your means?
Simply put, when you live below your means you spend less money than you earn.
This doesn’t mean that you have to deprive yourself of the things that you love and that make you happy. But it does include being aware of your spending, tracking your expenses, and making decisions based on the facts.
Living below your means sounds so simple and seems to be a no-brainer. Why doesn’t everyone do it? Because we live in a consumerist world.
Many people feel that they need to spend money on the best clothes, the newest car, and the most expensive toys and gadgets. But that initial feeling of happiness from purchasing material things quickly fades and the money that was spent is gone.
Wouldn’t it be great to have that money instead? You could use it to pay off debt, save for retirement, or tuck it away in an emergency fund.
Living below your means can take a lot of discipline and dedication. But once you start it becomes a good habit. It should be a long term lifestyle change instead of a temporary solution to a problem.
Ways to live below your means
There are many different but synergistic ways you can do to live below your means. We’ll look at three of the most important ones here.
These are the secrets to living below your means: track your spending, identify your wants and your needs and eliminate unnecessary expenses.
Track your spending
In order to live below your means you need to know how much money is coming in and how much money is going out. Tracking your earnings is easy but tracking your expenses will take a little bit more work.
The easiest way that I have found to do this is by creating a spreadsheet. Be sure to include:
- Electric/Water bills
- Car payments
- Insurance – Homeowners, Car, Health
- Additional purchases: Groceries, Gas, Dining out, etc
Try keeping track of all of your expenses for a month. When my husband and I first started doing this we found it to be an eye opening experience. It is amazing how much money you spend and don’t even realize it.
Identify wants vs needs.
Before making a purchase, ask yourself “Is this something that I need?” Putting the time in to study your purchases and identify them as either a want or a need will greatly influence your actual spending.
Impulse buying is one of the worst things you can do financially.
I mostly shop online and often put items into my cart and leave it there. I revisit it when I am ready to make my purchase and weed out the things that I don’t actually need. This little bit of time spent before purchasing gives me a little reality check. It forces me to think before wasting my money.
When living below your means, you need to make a conscious and informed decision when making purchases. And there’s nothing wrong with occasionally buying something for yourself or others, even if it is a little splurge. You just need to take that into account in regards to the rest of your spending.
Eliminate unnecessary expenses
Once you have a good understanding of your actual expenses you can start to eliminate those that are unnecessary. Again this goes back to the concept of identifying wants versus needs.
For example, if you subscribe to Netflix but barely ever watch it, then that is probably something that you would consider cancelling.
Another, more extreme, example is eliminating your car payment. If you have a very large burdensome car payment, you could consider selling your car. If you were to save up your money and purchase a car with cash then you wouldn’t have to worry about a car payment (plus interest).
Removing these avoidable costs in your life will greatly help you to live below your means and put you in a better financial situation.
Benefits of living below your means
If you’re like some people, the phrase “living below your means” may trigger some form of resistance, especially if it makes you think that doing so is tantamount to living the life of Scrooge.
But the truth is, there are so many benefits to living below your means and you don’t need to live in poverty to do it either.
Save money and pay off debt faster
Living below your means will allow you to save money and pay off your debt faster. It will also stop the accumulation of new debt before it even happens.
Remember how we talked about tracking, studying, and eliminating expenses? These tasks alone will help you to cut costs and have more money to either save or pay down your current debts, which are both financial wins.
One of the best benefits of these secrets to living below your means is having less stress. Knowing that you don’t have to worry about making a house payment or buying your groceries because you have the money for them is freeing. If you are truly living below your means then you know that these expenses fit within your budget.
Every dollar has a purpose and every expense should be accounted for. If you have tracked your earnings and expenses correctly, then you won’t have to worry about not being able to pay a bill. You have already planned ahead for it and know exactly where your money is and where it will go.
Reducing stress in our lives has both physical and mental benefits. It allows us to sleep better, have better relationships with others, and feel more at peace with ourselves.
Find contentment in your life
Living below your means is a lifestyle change.
When you stop trying to keep up with the Joneses and stop being wasteful with your money, you get a sense of relief. You, instead, start to look for happiness in things that matter to you. You find your values and realize that the feeling of contentment that you have is something that you want to hold onto.
Final thoughts on living below your means
Many of us have a lot of bad money habits that are hard to break. But changing the way that we think about and spend our money is so worth it. We must remember that happiness is not tied to material things.
From my own personal experience, living below our means, eliminating debt, and having an emergency fund has allowed us to sleep peaceably at night. We don’t worry about being able to afford car repairs, the expense of house projects, or providing for our family’s basic needs. The stress of needing a paycheck at the end of the week just does not exist anymore.
This lifestyle change that reduces stress and creates contentment will also push you towards taking the steps to living your best life, which is something that everyone should strive for.
If you truly want to have less stress and be more financially secure, then you should take the first step now by living below your means. I guarantee that it will make you feel more financially free and bring more peace and happiness to your life.
You have the capability to make positive changes in your life. And there’s nothing more empowering than knowing that you can control your financial future.