Live below your means – Benefits and top tips

We say that you live below your means when you spend less money than receive each month, either through their salary or through extra income.

So let’s say you receive US$5,000 a month and only spend US$3,000.

In this case, you live below your means and have enough money to invest in your goals to achieve great objectives.

Read on to find out the advantages of living this way, as well as the best tips for applying the strategy in your life.

How much do I need to save each month to live below your means?

There is no specific amount.

It could be that a person earns US$5,000 a month but spends US$4,800.

They’re still spending less than they earn, so technically they’re living below their means.

But they’re not getting all the advantages of the strategy because they’re only saving US$200.

When used correctly, the method guarantees you the following benefits:

Being prepared for emergencies.

Let’s continue with the example we gave in the introduction.

You save US$2,000 every month and if you don’t have it, you can use this amount to start creating your emergency fund.

The person who saves US$200 can do the same thing, although it will take them longer to gather the money that will be used for emergencies in the future.

And of course, by saving and start to live below your means, you have funds for other needs.

The upholstery on your favorite armchair has ripped, you need new sneakers and shoes, maybe you want to buy makeup or a scented perfume.

In none of the above cases should you take money from your emergency fund, precisely because they are not indispensable or urgent items.

However, this doesn’t mean that these items aren’t important and that you can’t use part of your income to buy them.

Another positive point is that saving money allows you to make bigger purchases.

Life isn’t just about working and saving, you can and should enjoy it too.

Maybe plan a family vacation to the beach or at least a weekend away, as well as buy a new laptop.

These are more expensive entertainments or products that require a certain amount of planning and, of course, money.

When you save every month and start to live below your means, these dreams become possible.

On the other hand, you have more freedom.

Living paycheck to paycheck or using your credit card to cover basic costs like paying bills creates enormous stress because you only see your debts growing.

A recent survey indicated that 73% of Americans said that their main concern was, not surprisingly, money.

By saving, you see your savings grow.

Healthy lifestyle and understanding the impact of your behavior

Also, know that you have a healthier lifestyle.

When you start saving, you start making decisions that indirectly impact your health.

As mentioned, financial stress is reduced, something that contributes to your mental health.

Can you imagine no longer seeing your current account balance in the negative? What a relief!

But that’s not all!

If you want to save as much money as possible, you’ll start eating more meals at home, avoiding visits to expensive restaurants.

They also stop ordering a stuffed pizza or a bucket of fried chicken to be delivered to their door.

Just by choosing to make their own food, they are eating more healthily.

In the same way, if this person is thinking of saving on gas or to live below your means, they’ll probably go to nearby places on foot.

Some people also give up their cars to use bicycles, something that not only contributes to the planet, but is also good for their physical health.

Recently, new concepts have gained attention, such as financial minimalism and environmental awareness.

In an indirect way, both work on the same concept:

Understanding how our behavior impacts the environment and also our financial health.

In this way, many people have adopted the idea of abandoning consumerism and materialism.

As a result, they are beginning to prioritize the concepts of reducing, reusing and recycling.

One of the solutions is to buy used items, whether furniture or clothes.

But we’re not saying that living below yours means having old furniture or wearing poor quality clothes.

When you do your research properly, you can find quality items at an affordable price, which is good for the planet and your pocket.

Final advantage

Probably the first thing that comes to mind when we talk about using the money you’ve saved is investment.

There’s no point in saving to spend on unnecessary items, and there’s no point in keeping money that could be earning money idle.

So, when it comes to saving money after you start living below your means, you have two options:

Contact a financial advisor for investment advice and find out everything you need to make your money work for you.

But if you don’t have the resources to have a financial advisor, do some research on your own.

Consider investing in the stock market and learning how to use your money wisely.

Historically, the market returns around 10% a year, which can increase your long-term savings, such as your retirement fund.

Tips for living below your means

First, define your priorities.

If I ask you what your dreams are, I’m sure a huge list will spring to mind.

However, it’s impossible to achieve everything at once, and if you try to do so, you’ll be very frustrated.

So you should plan to spend less money on a day-to-day basis, and finally be able to achieve your goals and objectives.

Let’s say your list is as follows:

• Buy a cell phone;
• Take your dream trip to Europe;
• Have a peaceful retirement;
• Buying a house.

For each of these items and to live below your means, answer the following questions:

• Why is this important to me?
• How long will it take?
• How much will it cost me?
• How specifically do I want this to happen?

This last question is the main one, because the more specific the goal, the easier it will be to include it in the planning.

For example, let’s say your dream is to visit the British Museum, which opened in 1759 in London.

You are an artist and the museum houses a vast collection of important works from human history.

Note that this already lets you know about prices.

Do you have to pay a fee to enter the museum? How much does it cost to rent rooms near the places you want to visit?

Giving more depth to your dream allows it to become a reality because you will calculate and live below your means to finally achieve it.

Also, ask yourself the following questions:

• When am I going to realize this dream?
• Can I put it off without compromising my quality of life?
• Which dream is a priority?
• How can I make it cheaper?

Save money and pay cash in advance

As well as defining your priorities, make sure you save money automatically.

If you just take your salary and use it hoping that you’ll have something left over to save and make your dreams come true, I’m sorry to say that’s not going to happen.

Remember that you live below your means, try your best to avoid unnecessary spending and aim to save money.

Therefore, opt for the option to save money automatically, even if it’s US$50.

On the other hand, you can also set aside money for bills as soon as you receive your salary and then also set aside money to achieve your goals and objectives.

Thirdly, give preference to paying in cash.

According to data from the Federal Reserve Bank of New York and WalletHub, the collective credit card debt of Americans exceeded US$ 1 trillion.

This happened between April 1 and June 30, and the increase was 45 billion dollars compared to the first quarter of 2023.

The explanation for so much debt is simple: buying without having any money.

Indeed, many Americans are facing a financial crisis and have to resort to credit cards or loans, but this is often due to a lack of life below your means.

There’s no need to take drastic measures like breaking off the credit cards.

However, an interesting tip is to use your credit card as a debit card.

In other words, only buy when you have money to avoid any kind of debt.

That way, when you see the balance coming to an end, it’s easier to organize your spending because it creates a “brake” on new expenses.

Monitor your budget and avoid necessary expenses

Another essential step is to monitor your monthly budget.

This tip is nothing new to anyone, and you may even be tempted to skip to the next one.

However, bear in mind that doing the basics perfectly will ensure that you have a smooth financial life and live below your means.

In this sense, have a spreadsheet or use a notebook to write down your incomings and outgoings.

This allows you to see what you’re spending your money on and whether it’s essential or not.

Still with basic actions in mind, say goodbye to unnecessary spending.

You’re spending on food apps, subscriptions and streaming may be small when analyzed individually, but what about when you consider them all at the same time?

A survey carried out by Ladder and OnePoll and reported by Vox, indicates that every year, Americans spend US$18,000 on non-essential items.

Although it varies according to job title, age, level of experience and other factors, the average salary nationwide in the US, according to Forbes, is $59,428.

In other words, around 30% of an American’s salary is spent on unnecessary items each year.

If you want to reverse this percentage of money saved, keep an eye on your spending and start living below your means.

In addition, avoid waste such as throwing food in the trash or buying clothes that are always forgotten in the closet.

At the same time, you should avoid impulse purchases.

Making purchases when you’re very sad or happy is detrimental to your finances.

Pay bills in advance and beware of installments 

As soon as you receive your salary, we recommend that you pay bills early if the company offers a discount.

For example, if you have a bill for US$1,000 and the company offers a 1% discount for early payment, you might think:

I’ll only get US$10 back, it’s not worth it!

But think of the long-term game.

In 1 year, the amount you get back from this invoice alone is US$120.

The same goes for debts, because if you have credit card debt, you can pay it off early to avoid paying high interest rates.

With regard to installments, consider whether it’s worth spending the rest of the year paying for a single product.

Although it may seem like an advantage, in the long run it snowballs, and you end up losing control because you start paying for other items.

Don’t wait to earn more to start living below your means

I can’t spend less than I earn because my salary is low. When I earn more, then I’ll save!

But what will earning more mean for you?

How much do you need to earn each month to start using your money wisely and stop spending on unnecessary things?

Our needs are unlimited, but our resources are not.

Managing your resources to meet those needs is your duty, otherwise you’ll never have a peaceful future.

It’s a relief to have an increase in income when our finances are totally compromised. 

However, what often happens is that we use the extra money to increase our standard of living, whether it’s to travel more or change the model of our car.

Of course, these are things that are eventually healthy.

However, when they become routine, they bring with them a greater commitment to income. 

When you learn to live below your means, regardless of the amount you receive each month, the moment you have an increase in income, you will invest in your future.

Daniel 2 de April de 2024