10 Tips to help you live below your means

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In a Nutshell

Living below your means allows you to save money, steer clear of debt and establish a safety net for unforeseen expenses. To live below your means is to be aware of how much money you exactly make and ensure your spending never exceeds that. Start by tracking your expenses, building out a budget and trimming unnecessary costs.
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To live below your means is to never spend more than your total earnings. You’re successfully living below your means if you make more money from your job and other income than you pay toward expenses.

That said, living below your means doesn’t require sacrificing what you enjoy. Instead, it prompts you to make better decisions about how, when and where you spend your money.

Thinking about the lifestyle changes you might have to make in order to live within your means may seem overwhelming, especially if you’re juggling expenses like rent or a mortgage, a car loan, student loans or credit card debt. Fortunately, there are ways you can still pay these bills on time while reaching your financial goals — and maybe even have some leftover cash to enjoy doing things you love. Let’s go over 10 painless ways to live below your means.


  1. Examine your financial habits
  2. Create a budget
  3. Track your spending
  4. Be mindful of credit cards
  5. Reduce meaningless spending
  6. Save from the start
  7. Negotiate rates and bills
  8. Pick up a second source of income
  9. Downsize your home
  10. Don’t buy into consumer trends

1. Examine your financial habits

Strong financial habits are the first step to living below your means and can help lay the groundwork for long-term financial stability and success. If you never have enough money to cover your expenses, it might be time to ask some important questions.

Are you tracking and planning your expenses, or do you make impulsive purchases? Are saving and investing a priority, or do you live paycheck to paycheck? Are you mindful of your financial goals and actively working toward them, or are you confused about your financial priorities?

Take a moment to reflect and consider whether your spending, saving and investing habits align with your lifestyle and major goals.

2. Create a budget

A budget is an impactful way to stop living paycheck to paycheck and avoid spiraling into overwhelming debt.

Create a budget by calculating your income and expenses to see whether you’re living within or beyond your means, and then establish a financial plan based on the outcome.

For a clearer picture of your total income, consider your salary and other sources of income as well, such as child support or your tax refund. Then, calculate how much money you spend each month. This includes every single transaction you make. For example:

  • Loan payments
  • Credit card payments
  • Insurance
  • Rent/mortgage payments
  • Food
  • Utilities

Expenses and income can fluctuate from month to month, so consider tracking your expenses for six to 12 months and find the average.

Now it’s time to determine whether you’re living within your means. If you have a positive number after subtracting monthly expenses from your monthly income, you’re living within your means. Alternatively, a negative number means you’ve likely been living beyond your means. You can use our budget calculator to get an idea of how much you spend and on what.

As you work toward financial security, consider these effective budgeting strategies:

  • 50/30/20 budgeting: You’ll break income into three categories — needs (50%), wants (30%) and savings (20%).This strategy provides a balanced approach to spending and ensures you take care of both immediate needs and future financial goals.
  • Zero-based budgeting: For each budgeting period, you’ll dedicate every dollar of your income toward either expenses or savings. This method encourages more accountability and forethought when spending, leading to better financial decision-making.
  • Envelope budgeting: You’ll divide your cash income into envelopes for different expense categories. The idea behind this strategy is that when the money in an envelope runs out, you can’t spend anything else on that category for the budgeting period. 

Overall, these strategies provide different approaches to managing finances effectively and meeting financial goals.

3. Track your spending

Once you’ve created a budget, track your spending to ensure you don’t risk falling off course. You can create a spreadsheet or use a budgeting app. Recording each purchase can force you to think twice before buying something.

4. Be mindful of credit cards

Credit cards allow you to make big purchases if you don’t have the money upfront and pay off those purchases each month. But those purchases can come with extra costs. The Consumer Financial Protection Bureau estimates that Americans pay roughly $120 billion in credit card fees and interest yearly.

While credit cards can be helpful, they can also lead to insurmountable debt. Limiting your credit cards to what you can realistically handle makes it easier to manage your expenses, reduce debt risk and maintain control over your finances.

5. Reduce meaningless spending

Fortunately, if you want to live below your means, you can cut back on some of your spending. As you track your purchases, ask yourself, “Do I really need this?” Questioning each purchase can help you better understand your priorities and identify what’s worth spending money on.

By spending less than you make, you can make progress toward getting out of debt, paying off loans and saving up for big purchases.

Depending on your interests, here are some areas you can reduce spending:

  • Memberships: Consider discontinuing monthly subscriptions and memberships you rarely use. A good rule of thumb is to cancel anything you haven’t used more than once in the last month or two.
  • Cars: Buying used vehicles can save you money while still getting you from Point A to Point B.
  • Food: Instead of going out for lunch and dinner, pack a lunch and cook at home.
  • Clothes: Spend less on clothes by shopping at secondhand stores.

6. Save from the start

Before you start spending your paycheck, consider transferring money to your savings account, emergency fund or retirement saving funds, like a 401(k) or Roth IRA. With an automatic transfer, funds can be automatically dispersed to different accounts so you can resist spending more than you should.

7. Negotiate rates and bills

Many customers think the rates that banks and credit unions charge for their services are set in stone. However, these financial institutions want to keep you as a customer, so learning how to negotiate with credit card companies can save you big-time.

To save money on your credit card bill, ask your credit card company if you’re eligible for a lower interest rate, a lower annual fee or a long-term repayment plan.

If your credit card company is unwilling to negotiate a lower price for your high-interest credit card, consider a balance transfer. Some balance transfer cards offer an introductory 0% interest rate on the transferred balance, giving you several months to make payments without being charged interest.

Our list of top balance transfer credit cards can help you pick an option that best suits your financial situation.

8. Pick up a second source of income

If you’re wondering how to live below your means, finding a second source of income can get you there. With a traditional day job, you may not have the time or energy to pick up additional shifts or work a second job. Fortunately, you can make extra money using your hobbies or interests or by leveraging everyday things you have access to.

For example, ridesharing services could be a convenient way to earn additional income if you have a car. Or you might consider serving customers at your local coffee shop on the weekends if you love lattes and foam art.

From home repair to writing to landscaping to professional tax services, you can take advantage of the many freelancing opportunities to help someone else, all while making money.

9. Downsize your home

Just the thought of moving out of the house you’ve turned into a home can bring up all types of emotions. But purchasing the most expensive home the bank says you can afford may cause you to struggle to keep up with insurance, mortgage and maintenance payments.

Instead, you might consider choosing a more affordable fixer-upper that requires just a few inexpensive home improvements.

Downsizing to a smaller home can help ensure you don’t live beyond your means.

With new trends appearing daily, it’s easy to fall into a cycle of competitive consumption — spending on items you don’t necessarily want or need just to keep up with your peers. But if the goal is to live below your means, you need to consider the long-term value of every purchase. Before you decide to buy something, think about …

  • The quality of the material
  • Warranty coverage
  • How much you’ll use it
  • Competitor pricing
  • Customer reviews

These considerations can help you prioritize your financial future, avoid unnecessary spending and seek out experiences and items that truly add value to your life.


What’s next: Spend less and save more

If you’re determined to create a more stable financial future, learning how to live with less money is one way to get there.

With these 10 tips, you have the opportunity to climb out of debt, pay your bills on time and begin saving for your long-term financial goals.

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