How to Live Below Your Means: Follow These 9 Smart Steps

Ever wondered why so many people swear by “living below your means”? Here’s an in-depth guide to the financial lifestyle that makes your money go further.

How to Live Below Your Means: Follow These 7 Steps
Updated May 28, 2024
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You’ve probably heard the expression “living beyond your means,” but have you ever thought about trying to do the opposite? One of the best strategies for living an affordable, balanced lifestyle is by focusing on living below your means — as in, not maxing out your wallet or credit cards on a regular basis and not counting the days until your next payday.

Living below your means isn’t just about how you spend money, it’s also about how you save, invest, and organize your personal finances. By changing your spending habits to focus on having more savings and less debt, you’ll be able to start enjoying a less-stressful lifestyle and more financial freedom than ever before.

Ready to learn more about living below your means and what it can do for your financial situation? Let’s do it.

In this article

Assess your current spending

In order to start living below your means, you need to understand the current way you spend money. This includes not only those nonessential items you may overspend on, but also your recurring monthly expenses.

These monthly costs will include living expenses such as your rent, groceries, and even utility bills. Your spending may also include your transportation expenses (such as gas or bus money) and other monthly bills, such as insurance payments, minimum credit card payments, and student loan payments.

To really get the full picture of your current spending, start by writing down all your monthly expenses and tallying them up. It’s OK not to have an exact number, but understanding the rough total of your monthly spending will help you with the next steps toward adjusting your finances for the better.

Cut out unnecessary expenses

Armed with your list of monthly expenses, it’s time to cut out all those unnecessary ones. What counts as an unnecessary expense? That’s for you to decide, but here are some examples that might help:

  • Entertainment: Take a look at how much you’re spending every month on things like movies, games, or even books. Is it all necessary? Consider getting a subscription service instead of going out to the movies or start visiting your local library for the ultimate savings. Or maybe you have subscription services you aren’t even using and you shouldn’t continue paying for.
  • Restaurants: Most people love ordering take-out and going out for date nights, but if a big chunk of your expenses is coming from restaurants and bars, it might be time to schedule a vacation from restaurants.
  • Shopping for fun: For some of us, it’s clothing; for others, it’s shoes, hats, or even collector’s items. Whatever your shopping vice may be, it’s a good category of spending to look at when deciding what spending you could eliminate.

If you’re having a hard time identifying where you might be able to eliminate spending, consider getting an app that can help. Services like Rocket Money can help you identify your spending habits and make suggestions on where and when to cut back.

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Look for expenses you can trim

People often forget this step, especially as it’s easy to forget the pricing of expenses like utility bills and insurance premiums isn’t set in stone. There are a number of recurring bills people don’t think to renegotiate.

Fortunately, there are also many ways to decrease your monthly payments. You might use an app to help you identify what bills can be lowered, or even do the research yourself. Just as you would when shopping around for the best insurance rates or internet package, take some time to reach out to local providers and find out whether they can offer competitive rates.

You can also save money on utilities simply by changing your usage habits. This might include things like taking shorter showers, decreasing the heat when you aren’t home, and turning off lights that aren’t being used.

If your most expensive bills come from things other than utilities, such as groceries, you might also try changing the way you shop. Shopping in bulk, or even using one of the best credit cards for groceries can all help you to save money on your regular grocery bills, and trim down your expenses just enough to make a difference.

Create a budget

Now that you know what you’re spending money on and have eliminated some excess in your regular bills, it’s time to create a plan for your expenses moving forward.

Contrary to popular belief, budgeting doesn’t have to be some sort of ultra-frugal living that cuts the fun out of your spending. In fact, the best budgets aren’t the strict ones, but the ones you can actually stick to in the long term. This means your ideal budget will strike a balance between paying your bills and saving up for the important things, as well as having some expendable income for the fun stuff.

There are many ways to create a budget, and you should take the time to learn about your options. Once you have a budgeting style in mind, set some financial goals for yourself. This might include things like saving more money each month toward your retirement or placing a cap on your nonessential shopping budget. Whatever you can do to live more frugally will ultimately get you closer to living below your means.

Monitor spending

With a budget in place, it’s time to start monitoring your spending more closely. Now’s a great time to begin tracking your monthly spending and seeing how it compares to your set budget.

If the numbers don’t align, it might be a matter of needing to readjust your budget to more appropriate levels. Maybe this means allocating more money toward your regular expenses and less toward long-term savings. This could happen for a number of reasons, especially if the prices of certain things you rely on, like gas or public transportation, increase.

The important thing in this step is to be honest with yourself. Is this really a matter of needing to readjust your budget? Or is it about needing to cut back your spending? Take a hard look at your spending habits and be honest when determining whether the discrepancy within your budget is simply a matter of needing to cut back further.

Use credit cards wisely

Another important piece of the puzzle in living below your means is changing the way you use credit cards. Although it may be tempting to max out credit limits and go month-to-month only paying credit card bill minimums, just making ends meet like this isn’t the best way to make good use of your credit. This high rate of credit utilization could also negatively impact your credit score.

Ideally, credit cards would be used to spend only the money you actually have, and you would pay your bill off in full every month. By limiting your credit card use to spending only the money you have, you’ll be able to rack up reward points or cash back without going into debt and being subject to high interest rate charges. This means credit cards could save you money instead of costing you money.

Resist the urge to let your credit card debt build up, and you’ll be one step closer to living comfortably below your means.

Put money into savings

When living below your means, you still want to be sure you’re saving up money for the important stuff, such as retirement, a house, or an emergency fund. By trimming down your expenses, you can allocate more of your income toward meeting these savings goals. With savings, you can also better handle any unexpected expenses or job losses that arise.

A good habit is using automated savings. This can be accomplished through various apps or even within your own bank. Automating your savings can help you put aside a certain amount of money into your bank account every month. Because this will happen automatically on a date of your choosing, you won’t have to worry about remembering to make the deposit.

In addition to setting up automated savings, you want to ensure you have the right kind of savings accounts. The best savings accounts could earn you a little bit of interest or at least not charge you any fees.

After creating your savings goals, set up regular reminders to check in on your progress. These might be monthly or even quarterly, but the important thing is to verify that you’re on track and working toward a better, more stable financial future.

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Start a side hustle

If all of this budgeting and financial planning still leaves you feeling like your monthly income falls short, then it might be time to consider starting a side hustle.

Side gigs can be a great way to earn more money on your own schedule, often doing something you love. Maybe you like spending time with animals, or helping out in the local community, or even just driving around in your car. Whatever your interests, there are plenty of side hustles to choose from.

Because you can commit as few or as many hours as you want to a side gig, it puts you in control when it comes to boosting your income. This extra money can go a long way in helping you live below your means by increasing the limits. If you’re not sure where to start, check out our list of the best side hustles.

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Downsize your living situation

Another way to get your budget under control is by downsizing your living situation. Often we don’t realize just how much we’re spending to be in our big house or multi-bedroom apartment. Keep in mind that larger dwellings aren’t just expensive in terms of paying rent or mortgage, they also tend to cost more in utility bills.

Ask yourself how much happiness your current living situation really brings, and if you need all that space or could be satisfied in a smaller home. If downsizing sounds like it might be a good option for you, be strategic about where you move next. Consider living in a place that allows you to save money on gas by walking or biking more, or even taking advantage of public transportation.

Downsizing can come in many forms, so go ahead and consider the things you’re paying for and just how necessary they really are in your current lifestyle. For example, you might choose to save up for a used car instead of a brand-new car.


What does it mean to live below your means?

Living below your means is when you spend less money than you make. It also means you’re taking advantage of your income to make responsible money moves like saving up for the future and not maxing out your credit. Living below your means is a lifestyle choice that can help anyone achieve more financial independence and stability.

What is the 30-day rule?

The 30-day rule is a spending strategy that helps people avoid overspending by taking the time to rethink a purchase before making it. Essentially, rather than buying something the moment you see it, the 30-day rule requires you to wait 30 days to see whether you still want it. Only then are you allowed to make your purchase.

How do I save for a house if I live paycheck to paycheck?

The best way to save for a house while living paycheck to paycheck is by using a budget. Budgeting can help you reach important savings goals at almost any income threshold. If your income is such that you don’t have enough money to save, consider getting a side gig to build your savings.

Bottom line

Living below your means isn’t just an expression, it’s a lifestyle choice. By choosing to spend less than you earn, and save more money while not abusing your credit, you’re making the choice to live an easier, stress-free financial life.

Living below your means won’t just help keep your finances in good health, it will also help you learn how to manage your money, which is truly one of the best skills worth having.

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Author Details

Larissa Runkle

Larissa writes for FinanceBuzz and divides her time between a cabin in the San Juan Mountains and traveling in a van. She enjoys writing about travel, debt relief, personal loans, and mortgages. Her work has been featured on MagnifyMoney, LendingTree, and Outside of finance and real estate writing, she’s also at work on several fiction projects. When away from the computer, you’ll find her reading, exploring local trails, and climbing rocks.