How to Finally Stop Living Above Your Means

MANAGE MONEY - BUDGETING
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.
Updated Feb. 21, 2024
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How to Live Below Your Means: Follow These 7 Steps

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One of the best strategies for living an affordable, balanced lifestyle is to focus on living below your means — as in moving beyond living paycheck to paycheck.

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.

Keep reading to learn more about living below your means while enjoying a less stressful lifestyle and more financial freedom than ever before.

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Assess your current spending

bobex73/Adobe happy man with shopping bags

In order to start living below your means, you need to understand the way you currently spend money. This includes your recurring monthly expenses and those nonessential items you may splurge on.

These monthly costs will include living expenses, such as paying for 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 improving your finances.

Cut out unnecessary expenses

leungchopan/Adobe 13 Companies That Might Never Recover from COVID-19

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 cutting a subscription service or two, or visiting your local library for the ultimate savings.
  • 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 long vacation from them.
  • 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.

Look for expenses you can trim

StockPhotoPro/Adobe Woman paying bills

There are a number of recurring bills people don’t think to renegotiate. Fortunately, there are many ways to decrease your monthly payments.

Just as you would when shopping around for the best insurance rates or internet packages, 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 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. Shopping in bulk, tracking deals, and using coupons can help you save money on groceries and trim down your expenses just enough to make a difference.

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Create a budget

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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.

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.

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.

Monitor spending

ibravery/Adobe Woman online shopping

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 on your spending?

Use credit cards wisely

Farknot Architect/Adobe woman holding credit cards

Although it may be tempting to max out credit limits and go month-to-month only paying the minimum, 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 cash back and reward points without going into debt and being subject to high interest rate charges. This means cashback credit cards could save 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

Jason Stitt/Adobe Money Market vs. CD

By trimming down your expenses, you can allocate more of your income toward meeting savings goals such as retirement, a house, or an emergency fund. Plus, 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 a certain amount of money into your savings account every month. Also, ensure you have the right kind of savings accounts. The top high-yield 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.

Downsize your living situation

Song_about_summer/Adobe Searching for apartment online

Often we don’t realize just how much we’re spending to be in our big house or multi-bedroom apartment. 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.

Start a side hustle

SB Arts Media/Adobe Man walking dogs

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 extra money, often doing something you love. Maybe you like spending time with animals, 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.

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Bottom line

nastia1983/Adobe Small girl in eye glasses scratching head, holding money

Living below your means isn’t just an expression, it’s a lifestyle choice.

By choosing to spend less than you earn, and looking for ways to save on everyday essentials 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 boost your bank account, 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 Realtor.com. 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.

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