Whether you are trying to save money, increase cash flow or break the paycheque to paycheque rut, learning to live below your means can be a financial game-changer. Here are 17 simple rules to help you live within your means. These tips are simple but may not be easy.
Know Your Income
Due to the unpredictable nature of cash received from selling used items (online or in a garage sale, for example), you may choose not to include this income at this step. Make a plan to put any unpredictable income towards your money goals, such as retirement savings and credit card debt repayment.
To track your expenses, you can go forward and start saving all your receipts for the next 3 months. Or, if you are a card spender (either debit or credit card), you can go back and use your bank and credit card statements to track your purchases for the past few months.
If this is your first time creating a plan, you may consider using a budget (or budgeting app) for a few months to get a better handle on your money. After a few months, you may feel more comfortable shifting to general money guidelines.
One of the best ways to live below your means is to spend less than you make. If you’ve gone through and calculated both your earnings and expenses, this rule is simple. But that doesn’t mean it’s easy.
Look for simple ways to decrease your expenses (with some of the tips listed in this list). Or brainstorm ways to increase your income. Start with the steps that feel easy, and don’t try to do everything all at once.
There are only so many living expenses that you can cut, but your earning potential may be limitless (within reason, of course). Increasing your income can have a much more significant long-term effect than trying to deprive yourself by eliminating spending that brings you value.
- Ask for (or negotiate) a raise or promotion
- Look for higher-paying employment opportunities in your industry
- Freelance (do you have a skill that is in demand?)
- Sell unwanted items
- Take on a side hustle
Credit cards can be a great financial tool, but only if you pay them off in full every month. If you don’t have the funds to pay for the expense, don’t put it on your credit card. Credit cards are not a source of income.
After you have spent some time tracking your living expenses, chances are you have found some easy payments to eliminate. Are you still paying for a subscription that you never use? Have you been charged a bank fee that you can avoid? What other bills can you decrease?
Have you heard of “keeping up with the Joneses”? Well, chances are the Joneses have a lot of debt to fund their extravagant lifestyle. Things aren’t always as they seem on the surface (or on social media).
Don’t waste your time and money trying to compare yourself to others. You will be much happier in the long run if you can align your spending with your values. Not only will you be able to live within your means, but you will also be spending money on things that bring you joy, not on what other people say you should spend your money on.
Embracing second-hand items will not only save you money but will also help the environment. I have bought lots of second-hand clothing that still has the tag on it. Imagine throwing something into the landfill that is still essentially brand new.
Service providers (internet, cable, phone service, insurance, credit card company, student loans) often have negotiable rates. By setting an annual reminder to review and negotiate these fees, you can save a lot of money over time.
- Ask to speak to someone in the loyalty department
- Know competitors rates
- Ask if they offer any special discounts (seniors, students, etc.)
- Always be friendly
- Don’t be afraid to call back and speak to someone else
- Do all your errands at the same time to prevent having to drive more than you need to
- Cut your transportation costs by walking or biking to work
- Take advantage of library services, programs, and products
Most of the above rules for living within your means relate to aligning your spending with your values. Sure, there will be times when you will have to cut some expenses or may not be able to afford certain things.
There will always be trade-offs. Maybe you want to go on a lavish vacation but are okay driving your older vehicle for a few more years. Or perhaps you decide to buy that new summer wardrobe second-hand to help you save a bit of money.
Taking the time to really sit down and decide where you want your money to go and then aligning your spending with those values can make you happier overall. And will also help save you money, prepare for the future and decrease stress levels of not living below your means.