If you’re on a mission to become a financially responsible person and reach financial freedom, you’ve probably heard advice from other people telling you that you should live below your means, especially if you’re known for being quite a big spender. However, living below your means doesn’t necessarily mean that you need to become as frugal as possible and stop spending entirely.
As a matter of fact, it’s possible to reach a balance between the two so that you can still live your life while having financial independence. In this article, we’ll give you a little background on some benefits you can reap if you live below your means, as well as some tips and advice on how to actually get it started.
What Does It Mean to “Live Below Your Means”?
So, what does “living below your means” actually mean? Essentially, it pertains to spending less than the amount of money you earn. To put it simply, when you receive your monthly wage from your work, you’ll still have some funds left over even when the new month rolls in—you’re not spending everything you earn in a month.
You see, if you live paycheck to paycheck, there’s a very high chance that you’ll end up living a life of debit because you’d have to borrow from others in order to pay off your necessities and living expenses. As a result, you put yourself in a loop or cycle where you’re always running out of money and borrowing from others.
So, living below your means is all about prioritizing your financial situation and ensuring that you have money in the future. Because money you spend on non-essentials doesn’t help build your net worth, nor does it help you save or invest. Take a moment to consider whether or not the item you want to purchase is more important than building up your long-term financial goals.
What Are the Benefits?
Without a doubt, living below your means has countless benefits that you don’t want to miss out on. We’ll list some of them below:
Reduce Your Stress Levels
Those who practice retail therapy won’t be happy to hear this, but living below your means can actually lead to less stress in the long run. While it’s true that you’ll receive a sense of euphoria whenever you purchase something new, but always keep in mind that these feelings of bliss are only temporary. When bills and payments come around, you’ll regret ever purchasing that shiny new toy that you don’t really even need.
Achieve Your Financial Goals
Naturally, if you use up all of the money you earn every month, you lose the opportunity to save and invest for your long-term financial goals. If you’re truly committed to reaching your financial goals in the future, it’s very important that you have extra money left in the month. And the only way to achieve this is if you live below your means. Unfortunately, that’s the only way.
Form Stronger Relationships
If you’re married, look back on all the times you’ve had fights and misunderstandings with your partner due to money. It causes so much stress and anxiety, right? Thinking about your financial situation is never fun, and the fact that it’s causing an argument with your loved one makes it even worse.
Since you’re aware of how bad it feels, think about how much your situation and your relationship could improve if you weren’t worrying about money. Don’t you want to live in that kind of reality? Fortunately, this can be possible as long as you’re in control of your money and living below your means. At the end of it all, you’ll come out stronger together.
Offers Career Flexibility and Less Pressure
When you’re considering a job opportunity, people typically go for jobs that have a good rate. The more money you make, the better. However, this isn’t the end all, be all of living and working. Just because you’re working at a high-paying job doesn’t mean you’ll automatically feel happy and satisfied.
If you live above your means, there’s a tendency that you’ll end up putting too much pressure on yourself. As a result, you’ll want to go for the highest-paying job possible in an effort to make your financial situation and quality of life better. However, this isn’t always the best course of action, as it could lead to burnout much faster.
On the other hand, if you decide to live below your means, you get to sit down and really think about what kind of career you want to have. You won’t put your income above everything else, including your health and mental health. If you live below your means, you also have the opportunity to just sit back and wait for a good job to come to you—one that you’re sure you’ll love and grow in.
How to Start Living Below Your Means
Believe it or not, but living below your means isn’t as difficult as you imagine it to be. However, it does require a lot of self-discipline and commitment. If you want to experience all the benefits mentioned above, then it’s time to start living below your means.
Major Purchases Should Always Be Reasonable
One key factor to start living below your means is to make sure that all the major purchases you make are reasonable. Take a moment to consider just how much you should be really spending on these items, such as a car, major home improvement projects, etc.
Take Note Of How Often You Spend
Next, you need to track just how often you spend and how much. Consider your day-to-day expenses, list them down somewhere, and evaluate whether your purchases are essential or non-essential. How often did you eat out today or order food when you can cook at home instead? These are important things to consider.
Use the 50/50 Rule
If you do well at work, you’ll undoubtedly receive an increase or some kind of bonus from your bosses. As your income increases, you could receive a tax refund, monetary gifts and bonuses, and more. When you receive such things, the first thing that most of us want to do is spend all the money. However, you need to avoid this mindset and follow the 50/50 rule instead.
The 50/50 rule is when you take half of the amount you receive, and either save or invest it to help build your net worth.
Living below your means, especially if you’re used to spending so much, can be a very intimidating process. However, the future version of yourself will thank you for starting this practice as soon as possible.