Do you spend more money than you earn and end up living paycheck to paycheck? It’s time you take action and learn how to live below your means.
Spending money is far too easy than earning it. Many people get caught up in the spending trap because they think they can always charge it to their credit cards or take out loans later on. But the truth is, it is this very mindset that stops us from achieving financial freedom.
You must learn to live below your means if you are solid and committed to your financial goals. Simply put, living below your means is all about controlling your spending so that your expenses do not exceed your income. That way, you prevent yourself from incurring more debt, and you can stash some funds for savings, retirement, unexpected expenses, and other financial goals.
But did you know that according to a survey conducted by LendingTree, almost 40% of Americans tend to overspend to impress others? These people tend to splurge on clothing and accessories.
It’s too bad that many people think they need to go beyond what they earn just to look cool and impress others when they’re also the very ones who end up with lofty credit card debt and tons of financial stress!
Why Should You Live Below Your Means

Living below your means paves the way to financial security. It doesn’t mean you must restrict yourself from spending money on things you love and value. It just means that you must revisit your spending habits and prioritize your essential living expenses over unnecessary expenses.
You don’t have to stop spending money on things that bring you joy. If you love nice clothes and fancy food, by all means, go for it! But before you splurge, take a long hard look at your finances and ask yourself this:
- Do I have enough money to pay my credit card bill?
- Do I have a solid emergency fund?
- Am I tucking away money into my savings account?
- Are all my monthly expenses covered?
- Am I saving money for my financial goals?
When you ask yourself these questions and find that the answer to most is a “no,” then you have some financial overhauling to do. Fortunately, you’ve found this article, and by the end of it, you’ll learn to live below your means regardless of your monthly income.
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15 Ways to Live Below Your Means
Want to manage your income better and stop living paycheck to paycheck? Here are the top ways to live below your means.
Tip: Use this tracker to track all the savings you make by using the extreme frugality tips I’ve listed in this post. You can download this free tracker by dropping your email address in the signup form below.

1. Create and Stick to a Budget
I believe budgeting is foundational to getting you to live below your means. When you have a budget, you assign a job to every hard-earned dollar you earn. You know how you move from your bank account and also become conscious of your spending habits.
According to finance expert Laura Suter, budgeting is for everyone, regardless of income level. With the cost of all commodities rising so significantly and rapidly, budgeting becomes even more crucial in resetting one’s finances and spending habits.
Start creating a budget by identifying all your sources of income: business, day job, side hustles, etc. Next, you must identify your monthly expenses, such as food, transportation, utilities, insurance premiums, etc. Don’t forget to include savings, emergency savings fund, retirement contributions, college funds for your kids, and other big financial goals.
Total all your expenses and minus this from your overall take-home pay. If you still have money left, that means you are living below your means.
2. Track Your Expenses
How do you know you are not overboard with your monthly expenses? You track all your spending, may it be big or small.
Tracking your expenses consistently makes you become more aware of your spending pattern. You’ll soon realize where your budget leaks are and allow you to correct your behavior. Also, you feel more accountable for your personal finances. You think about a purchase several times before you actually dole out your cash or card to the cashier.
When you track your expenses, you’ll see that even those little meaningless expenses add up. You might think a bottle of water doesn’t cost much. But if you purchase at least one bottle every day, you spend money amounting to at least $800 a year! Think about it: if you knew you were spending this much money on water, then you would have thrown that 800 bucks toward your savings accounts, rent, or mortgage payment.
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3. Cut Back on Unnecessary Expenses
So you’re tracking your spending, and now you have a clearer idea of where you might be overspending (and yes, that bottled water is a great example of that). To live below your means, you need to cut back on spending.
The goal is to widen the gap between your monthly income and your living expenses. When you do that successfully, you unlock extra money that’s right in your budget all along!
Now, go back to your budget and your spending tracker and which of the discretionary expenses you could cut back right away, and focus on your basic expenses. Also, remember that you could easily find cheaper alternative options, saving you more money.
To get you started, why don’t you cut:
- your cable and use cheaper streaming services
- cancel your gym subscription if you can’t religiously go. Run or walk around the neighborhood, follow an online workout, or exercise at home instead
- limit dining out and reserve it for special occasions
- limit or eliminate going to the cafe or restaurant for lunch. Cook and bring your own lunch to the office
- limit going to the movies and enjoy a movie marathon at home
- replace branded items with generic ones when you go grocery shopping
- carpool or take public transportation a couple of days a week to reduce spending money on gas
- opt for clothes you can easily mix and match, so you don’t keep buying new ones
You’ll save money if you can do most or all of these. Plus, many of these aren’t even big sacrifices and only take getting used to. It’s a cumulative effort though, so the more areas you can reduce your spending, the more you can save money.
Tip: Use this tracker to track all the savings you make by using the extreme frugality tips I’ve listed in this post. You can download this free tracker by dropping your email address in the signup form below.

4. Pay Yourself First
How do you ensure you’ll always save money?
My short answer is this: make saving money your top priority.
This concept is called paying yourself first, which is instrumental to your financial success.
When you pay yourself first, you stash away money in your savings account even before you spend money on basic living expenses. You pay yourself first, even before you pay for anything else. And if you do this consistently, you are building a long-term nest egg that helps you achieve financial freedom earlier.
Also, the habit of paying yourself first allows you to secure your savings to avoid using them in day-to-day spending. The key to success in saving money upfront is to follow this formula: INCOME – SAVINGS = EXPENSES.
Apart from the monthly payments you make towards your savings account, also pay yourself first when you come across unexpected money. For example, if you’ve received a birthday cash gift, a large sales commission, or a tax refund, always put aside a portion of that money into your savings, then you decide what to do with what’s left.
5. Automate Your Savings
Saving consistently is crucial for you to live below your means and, ultimately, attain financial security. But some people think it’s hard to save money. Often, they don’t have the discipline and motivation to set aside savings from their household income.
One of the easiest ways to ensure that you can always save money is to put it on autopilot. Automating your savings is a matter of putting a system in place so that each time your income reaches your bank account, it automatically transfers a portion of it into your savings account.
The beauty of automating your savings is that you are forced to save money from each paycheck. You won’t have to worry about forgetting it or touching it for some impulse spending.
Think of these as automatic paycheck deductions that happen in the background. So if the money is out of your sight, then it is out of your mind, and you curb the temptation of using it on unnecessary expenses.
6. Pay Cash

Credit card debt is part of our lives, but it doesn’t have to dominate us. Relying on credit cards too much can put you in financial chaos, especially when you can’t keep up with your credit card payments.
Paying in cash is another sound strategy for living below your means. That is because paying in cash helps you avoid credit card debt and other types of loans. As you know, credit card debt repayment can hurt when considering the interest you have accrued for all the months you’ve missed your payment.
If you have the money upfront to pay cash for something, it means that you can afford it, and you won’t have to deal with debt in the upcoming months. You also become more mindful about your spending when you pay with cash. You feel physically separated from your money, so you often think about the purchase.
I suggest using the envelope budgeting method when paying for most of your expenses. You just need to segregate your cash into spending categories. If you need to pay for groceries, you take out your envelope for groceries and take out the money from there.
You stop spending once you’ve used up all the cash in that budget category. If you have some money left, you can roll it over to next month’s budget, put it into savings, or treat it as extra money for anything you fancy.
7. Live on One Income
Having multiple income streams is one of the best ways to secure a stable financial future. But some people make the mistake of inflating their lifestyle because they feel that they have surplus disposable income to spend on things like a brand new car, luxury items, lavish vacations, and more.
But you could achieve financial independence if you were to make a budget on one income. You pay all your needs and wants with a single income stream and put all the remaining income streams towards savings and investments.
This means that while you have the capacity to spend money as much as you want, you are living below your means by prioritizing your needs and allowing your money to make more money.
8. Save Up an Emergency Fund
Unexpected expenses will always make their way into your life, no matter what. But what matters is that you’re prepared for them, so you don’t get into a troublesome financial situation.
Saving up for an emergency fund must be a core part of financial planning. It simply means preparing for an emergency, including out-of-pocket medical expenses, an unexpected car repairs, and other unavoidable household costs like fixing the plumbing.
Personal finance experts suggest saving up an emergency fund that’s at least three months’ worth of expenses. This should help you tide over a financial woe without going into debt. You could start aiming to save $1,000 first and make your way up until you’ve accumulated enough financial cushion that you’re comfortable with.
9. Re-think How You Use Your Credit Card
Another way to spend less money and live below your means is actually to stop or reduce the use of credit cards. So as long as you don’t settle your credit card bill in full, that credit card debt will just keep ballooning.
We’ve already mentioned using cash to help you avoid using a credit card. Also, consider saving money for specific purchases and set them aside until you’ve had the full amount.
For example, if you want to purchase a luxury bag worth $10,000, make sure to save this much money before swiping. Once you do, you’ll get to enjoy all the miles and rewards from your credit card, plus you already have the full amount to cover that expense. Talk about guilt-free spending!
10. Negotiate Your Bills

You could try negotiating your bills and rates if you want to make some room from your monthly spending. For example, you could try to pay some of your medical bills upfront and enjoy some discount.
You could also talk to your credit card company and see if they’d be willing to give you a lower rate. Most credit card companies are willing to work with responsible customers to maintain their business so that a negotiation could be advantageous for you.
11. Downsize Your Home
Is your mortgage payment making you house-poor? It’s high time you consider your living accommodations and possibly downsize your home for you to live below your means.
Downsizing your home can be a great way to save a good amount of money. If you live alone or are an empty nester, downsizing could help you live below your means because you’ll be spending less on maintenance payments, home improvement projects, utility bills, and more.
12. Buy Second-Hand
Another way to live below your means is to save money on certain expenses by buying second-hand. For example, opting for a used car can help you save thousands of dollars compared to buying a brand-new car.
Apart from a second-hand car, you could also buy second-hand clothes, toys, furniture, and decor. It may take effort to score good used items, but the savings could go a long way in padding up your bank account.
13. Start a Sinking Fund
Are you planning a big purchase in the next couple of months or years? Starting a sinking fund today helps you reach that goal without going into debt.
A sinking fund is a type of savings that is dedicated for a specific big purchase. It is separate from your emergency savings fund.
A sinking fund works by identifying your financial goal, the savings timeframe for that goal, and the amount you have to save every month. For instance, if you want to spend on a home improvement project the next summer, then you need to save a certain amount each month to finance that project.
You could start a sinking fund for your next car purchase so you won’t need to get an auto loan or deal with a costly monthly payment. You could also save for an upcoming wedding or vacation. So if you really look at it, you are saving money to spend later without getting into debt or feeling guilty about it. And that is one of the best hacks for living below your means.
14. Start Investing
Once you’ve gotten a firm grasp of your finances and are able to curb impulse purchases and save money religiously, it’s about time you explore ways to make surplus money work for you. And this is where investing comes in.
Investing is crucial to financial success, and when done right, you can continue living below your means and build wealth simultaneously. Fortunately, there are several investment vehicles you could get started with right now, and you don’t even need to shell out a huge amount upfront. To start with, you can explore these investing options:
- Buy fractional shares of a large company
- Put money in a high-yield savings account
- Get started with micro-investing like Acorns, Robinhood and Stash
- Invest in your retirement account (IRA and ROTH IRA)
- Invest in property through real estate investment trusts
- Invest in fine jewelry
15. Create New Income Streams
Creating additional income streams help you nail down your financial goals and get out of the paycheck lifestyle quickly. I know we’ve all heard of the phrase “do not put your eggs in one basket,” and I believe it is relevant in this context.
Having a job is great, but what if you could make even more money by taking on a second job? Many people are into the gig economy nowadays, as it offers a good amount of flexibility and time freedom for you to work on another making-making pursuit.
For instance, you could become a weekend photographer, create and sell crafts, flip products online, or offer services in your free time with jobs like content writing, transcription, and proofreading. If you’re into content creation, you could become a YouTuber, an Instagram influencer or brand ambassador, or an affiliate marketer on TikTok.
Apart from that, an extra income stream could mean getting a tenant for that spare bedroom in your house, renting out your second car, and power tools, among other things.
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16. Have a Healthy Money Mindset
After talking about the practical and actionable steps for living below your means, let us not forget how mindset plays a crucial role in all of these. And you can only be successful in this goal if you have a healthy money mindset.
You need to vanish your limiting mindset because that is one thing that prevents you from making more money. The limiting or scarcity mindset tells you that there are not enough resources to go around and that you’d be forever stuck in your paycheck-to-paycheck lifestyle and that you just have to accept it as it is.
Instead, you need to adopt the abundance mindset, opening yourself up to more money-making opportunities. The basic premise is to believe and affirm with yourself that there are enough opportunities for everyone to make and attract money.
According to money mindset coach, Helen Adams, you should not stop yourself from buying that $3 coffee if it makes you happy and productive in the morning. Instead, you should explore ways to create extra income to cover the cost of that coffee, and you’ll probably even make more!
Conclusion
Certain life events may force you to live below your means. But you don’t need to hit rock bottom for you to start getting into this lifestyle. If you want to reach financial freedom, you should widen the gap between your income and expenses by creating extra income streams, cutting back on expenses, and thinking about money positively.
Once you’ve gotten into this vibe, you’ll find that living below your means is easier than you initially thought. It also gives you a sense of fulfillment as it allows you to spend on valuable things without getting into debt, become more intentional with your life goals, and significantly reduce meaningless spending.
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