How To Live Below Your Means To Save Money
Living below your means is going to be the best way to keep on top of your finances and actually take away some of that money stress. In this blog post I’m going to give you loads of practical and informative strategic advice to be able to put into your day-to-day life to help you save money and live below your means. So whether you are a low-income family low-income person on their own or maybe you have lots of money coming in but actually you'd like to be a bit more sensible with it and work towards either Financial Freedom or just better Financial well-being.
1. Have a Budget
First things first, you need to have a budget. It's actually about nailing down the detail to know exactly what you've had come in that month what you're going to have going out that month and everything in between. You need to be putting everything on this budget, not just your rent and bills, include all the little things like a haircut or a birthday present that month.
You’ll notice spending habits you didn’t even know you had then you can start making changes once you realise where all your money is actually going. I personally also like to have a treat budget… if you’re prone to impulse buying, or maybe you like to get a little takeaway coffee once a week, put that down in your treat budget then it’ll take away that guilt of spending but also you can treat yourself and not be overspending because you’ve already budgeted for it. It makes life so much easier, you can literally do this on a piece of paper or a spreadsheet, don’t feel like you have to buy a budget tracker.
Once you’ve done your budget, you’ll see what areas you can cut back on. I’m talking about the things that slowly add up that you don’t really need, I’m not saying cut out all the things you enjoy. You can also look at more affordable alternatives to the things you spend a lot of money on… can you eat out somewhere cheaper, or cut down on the alcohol and switch to water sometimes? Is there a cheaper car insurance option available or cheaper broadband? These tiny little tweaks to your budget can really add up and help you live below your means.
2. Differentiate Between Wants and Needs
Tip number 2 is to differentiate between your wants and your needs. Obviously you need to pay your house costs, your bills, your food. But your wants can be a holiday or a new outfit for an event, and a great way to budget for your wants is to put money into a sinking fund. Which is where you basically put away a bit of money every month specifically to spend on this want, so when the time comes to buy it you’ve taken away any spending guilt but also you can afford it because you’ve saved for it specifically. It’s important to realise if this particular want is actually important to you and your life, ask yourself why you want it, does it push you further away from your financial goals if you buy it, can you really afford it. Ask yourself what’s the real cost beyond the price tag… and think about how long will it actually make you happy.
A little sub category here, but if you’re prone to getting takeaways, cut it out. I’m someone who never really gets a takeaway and when I do it’s very rare. This is a want that I think is quite unnecessary because the cost of it is just silly to me. I’ve seen people say they spend a thousand pounds a month on takeaways which is wild to me. But if you want to live below your means, this is something that can be cut out or at least heavily cut down. Meal prep and meal plan and you’ll never be left wondering what to eat that day or feeling like you can’t be bothered to cook. And when you do want a takeaway for that odd occasion, make sure it’s in your budget that month so it’s not a surprise cost.
3. Prioritise Saving
Tip 3 is to prioritise saving. Once your needs are accounted for, putting money into savings first is a great idea, especially doing it straight away and not waiting until the end of the month. This is what we call paying ourself first!
Just remember that everyone is on a different trajectory, different story, different lifestyle, different earnings, so everyone’s budget will look different and everyone will be able to save a different amount of money it’s just important to not compare your financial situation with anyone else's. But having an emergency fund is so important because anything can come up unexpectedly that you haven't budgeted for and you haven't got a sinking fund for so you never want to be caught out. It’s just a safe and sensible thing to have.
4. Avoid Debt
Tip 4 is to avoid debt where possible. Sometimes it's unavoidable but to avoid debt is really really important when it comes to living below your means because if you are going to be buying things that you don't need that you're putting on credit then you're going to get into debt and then it's just creating these really bad habits when you have to pay it back because you may not have the money to pay it back and it's just a really unhealthy spiral to go down.
Having said that, credit cards are not a bad thing as long as you pay it back in full every month because you’re building a good credit score. Definitely do some research into the pros and cons of owning a credit card before you get one and start spending.
5. Be Aware of Lifestyle Inflation
And tip number 5 is to be aware of lifestyle inflation. If you get a pay rise or start earning more money elsewhere, doesn’t mean you have to now start spending more. As your salary goes up, if your spending is also going up, you’re still gunna be in the same situation of living paycheck to paycheck and nothing’s really going to change. So be aware of lifestyle inflation and even if you’re earning more than you were before, try to keep your spending at the same level.
Living below your means to save money requires discipline and making conscious choices about your spending habits as well as making a few sacrifices as well. Just remember it’s all for your own good, to take away that money stress.
While you're here, check out my latest YouTube video How To Live Below Your Means To Save Money | Practical Frugal Tips
