The urge to show off, seek external validation, and keep up with the Joneses are common triggers that force people to live above their means. If not properly addressed, these tendencies can lead to accumulated debts, financial stress, or worse, poverty.
Are you living above your means? Below, we covered some expert tips on how to change that. These tips are designed to ensure that you live within your means, thus achieving financial security and securing your future in the process.
What does it mean to live within your means?
Living within your means is about spending less than you earn so that you can save or invest the excess to achieve your financial goals. Alternatively, one can say that living within your means involves spending money on things you can comfortably afford.
I urge you to live within your means. One cannot spend more than one earns and remain solvent. I promise you that you will then be happier than you would be if you were constantly worrying about how to make the next payment on nonessential debt. – Thomas S Monson.
Are you living within your means? Here are signs to look at for answers.
Signs you are Living Above your Means
You Have Zero Savings and Investments
Savings are necessary for rainy days, while investments help secure your future. If you lack savings or investments, it’s a sign that you are living above your means.
Check your spending habits and make necessary adjustments so you have leftover cash to save and invest.
You Spend To Impress
Do you splurge on luxury clothing and accessories to keep up with the Joneses or impress a girl or guy you like? If you lavish four months’ worth of your salary on designers, luxury dining experiences, or vacations, you are living above your means.
You are Living Paycheck to Paycheck
If you look forward to every paycheck to pay your bills and cater to your needs, it’s a sign that you are living above your means. Those who live within their means rely on their savings rather than their next paycheck when their immediate paycheck gets exhausted.
You spend more than you make?
Do you earn $15,000 monthly but rack up monthly expenses of $40,000? You are living way above your means. And if you fail to reduce your expenses, you may end up deep into debt, which can be terrible for your finances.
How to Live Within Your Means.
Are you eager to live within your means but don’t know how? Here are some helpful tips to consider.
Take Note of your Income.
You can’t live within your means if you don’t know how much you earn. So, take note of your income. How much do you make per hour? How much do you make per month? Do you have side hustles? How much do they bring in?
With this information at your fingertip, it becomes easy to plan your expenses based on your income. Plus, knowing how much you make makes it easy to create a budget, prioritize expenses, save, invest, etc.
Spend Less than What You Earn.
After taking note of your income, what next?
Spend less than what you earn!
Say you are a petroleum engineer working in an off-field service company that pays $25,000 monthly. It would be unwise to splurge $60,000 on unnecessary monthly expenses. If you have essential expenses that may gulp two or three times your monthly income, plan for it to avoid overspending.
Create a budget and stick to it. If you’ve tried budgeting and you sucked at it, consider gamifying it.
And how does that work?
Simple.
Create a budget challenge. Assign yourself points for keeping to your budget. And in the end, reward yourself for your commitment. Budgeting helps tame your spending habits while ensuring you only spend money on necessary things.
Make more money.
If you don’t have a lot of expenses, yet you spend more than you earn, it’s probably a sign that you need to supplement your income. There are two ways to do that. First, you can try to get a raise at your current job to boost your income. Alternatively, you can consider taking up a lucrative side hustle.
Truth is:
There are many ways to make money online and offline. Select one as your side hustle and give it all you got. In no time, provided you stay committed and patient, you should have two jobs that provide enough income to cover your expenses and live under your means.
Save for Big Purchases.
So you earn about $6,070 monthly, but there is this new Chevrolet Camaro you saw in the dealership across your street that has caught your attention.
You dream of it every day.
You even visualize driving it in the neighborhood amid envious stares.
But rather than give in to the temptation of buying the car impulsively, it is better to plan for the purchase. That way, you don’t have to take a loan to cover the purchase or sacrifice essential expenses for the big purchase.
Don’t live beyond your means. If you can’t afford something then save for it! – Peter Moore.
Planning for big purchases makes it easy to live within your means while avoiding financial stress and debt.
Monitor your Spending.
Spending like a high roller is easy when you don’t know how much is going out and where it’s going. And it takes a few weeks of extravagant spending to wreck your finances.
By monitoring your spending, you can note early signs of overspending and address them before they become full-blown and cause great financial distress. Plus, it helps you become a more responsible spender, which is good for your financial well-being.
That said, how do you monitor your spending?
You can do that by:
- Creating a budget
- Checking your account statements
- Creating a spreadsheet to track your expenses
- Leveraging expense tracker applications
Save for Emergency.
Saving can be hard when you have many expenses screaming for your attention. However, the few thousand dollars you stash somewhere can be your saving grace when those unexpected expenses come knocking at your door.
Frank Sonnenberg, author of The Path to a Meaningful Life, has this to say about saving: “Save when you don’t need it, and it’ll be there for you when you do.”
You can start saving by earmarking a portion of your monthly paycheck for emergencies. This will ensure you don’t take unplanned loans to cover unexpected expenses or add to existing ones. And, of course, living below your means is easy when you have emergency funds saved up.
Stop the Comparison Game.
When you start comparing yourself to your neighbor who just got a $226,570 2022 Ferrari Roma, you may be forced to spend money you don’t have or aren’t supposed to spend to keep up with the Joneses. And when you do that, you’ll be short of money meant to cover essential expenses.
Debasish Mridha, an American physician, philosopher, and author, once said, “Comparison robs us of joy and is the shortest route to misery.”
So stop the comparison game to shield yourself from potential financial misery. You should spend money based on your needs, not based on someone else’s wants.
Negotiate a Lower Price.
Want to save money? Try negotiating a lower price for your health care bills, rent, utility bills, subscription services, car purchases or leases, etc.
Negotiating a lower price helps you save money, which can be put into other essential expenses. In the end, you’d be spending less on purchases that would have required you to spend more, thus allowing you to live within your means.
Remember, the first step to negotiation is research. According to Amit Kalantri, author of Wealth of Words, “During the negotiation, information is more valuable than eloquence.”
Having a good opening line, being polite, and mentioning a competitor’s lower price are other helpful negotiation tips to remember.
Final Thought
Living within your means may seem like self-inflicted torture in the short run. However, it can pave the way to your financial freedom in the long run. In addition to financial freedom, living below your means brings peace of mind. It also makes it easy for you to achieve your long-term financial goals. Remember, it’s unwise to go broke trying to look rich.
Frequently Asked Questions
What does it mean to live below your means?
Living below your means is about spending money on things you can afford. It also involves managing your finances responsibly so that you have enough to save and invest.
Why is it important to live below your means?
Living below your means is important as it helps ensure you spend less than you earn, making it possible to meet your financial obligations. When you live below your means, it’s easy to save, invest, achieve your financial goals, and secure your future.
What are the benefits of living below your means?
The benefits of living below your means are peace of mind, financial freedom, zero financial stress, minimal or no debt, the opportunity to save and invest, etc.
