As you began reaching adulthood or working on your personal finances, you’ve probably heard (or read) that you need to “live within your means.”
It’s a standard process that will help ensure everyone is more financially responsible and will have long-term healthy finances.
However, even though the idea behind this concept is so simple, many times people fall into the trap of spending more than they currently make or have.
And yes, even those who have bigger salaries or overall income can fall into the lifestyle inflation trap too.
Below, you’ll learn more about living within your means, why it can be difficult, and tips to stay within your budget without feeling deprived.
What is Living Within Your Means?
To “live within your means” simply means you are ensuring that the amount of money you spend is less than what you bring in every month. This helps prevent you from going into debt, living paycheck to paycheck, and encourages you to save money for your emergency fund.
Typically, the best way to ensure you are living within your means is to budget or at the very list, be incredibly financially aware of your income and expenses.
Budgeting is not the most fun part of life, but it can have major positive impacts on the way you spend and save money.
Luckily, you can also use various personal finance software that can make the process less tedious and helps you stay on the right track.
A few financial tools you might consider to help include:
- Personal Capital (net worth, spending, investment tracker)
- Savology (easy financial planning software)
- You Need A Budget (powerful budgeting software)
Why Can It Be Difficult to Live Within Your Means?
For some people, living within their means is pretty easy and many have no trouble transitioning. However, it can also be challenging for others to break bad financial habits and get spending under control.
Why can it be so difficult to live within your means?
Credit cards
One of the main reasons it can be difficult to live within your means is the direct access to credit cards. If you have multiple cards with decent credit limits, it’s incredibly easy to swipe it constantly and buy things.
You aren’t seeing the physical cash and you know there is plenty of room on your card(s), so it becomes second nature to whip out the plastic whenever you feel like.
Online shopping
Along with credit cards, is the quick access to buying things immediately via websites. There are thousands of websites where you can buy stuff with just a click of a button if you have an account already.
Even if you do not have an account, the constant access to the internet makes it tempting to spend. Plus, you are bombarded by marketing ads and emails with coupons.
Fear of missing out
An area I think our society deals with a lot is FOMO or “fear of missing out.” When we are with family, friends, or colleagues we tend to not want to miss out on anything fun, events, going out, etc.
You see them enjoying themselves, maybe have the newest iPhone, or whatever and feel like you need to keep up. This is sometimes referred to as “Keeping up with the Joneses.”
Social media
This sort of goes along with the above section, but was worth separating. With social media platforms, there certainly is both good and bad from them.
And when it comes to your finances, it could be hindering how you spend money. People like to show off their lifestyles, successes, and all the cool things they have. It can make you feel bad about your own life or feel like you are way behind your peers.
Now you start spending and making choices just to also keep up and show off. However, social media is not always a source of truth and people only tend to show the positive sides. What you don’t see is their financial struggles, debt, or lack of happiness. Once you realize that, you can stop worrying about others and focus on your own financial goals.
Feeling limited
Besides feeling like you are missing out, you might get this overwhelming feeling of limitation or deprivation.
Not everyone is super into a minimalist lifestyle, nor should you feel like you can’t enjoy having things or treating yourself from time to time.
But feeling limited can cause you to make more extravagant spending choices or poor financial decisions to try and shake that uneasy or unhappy feeling.
Tips to Living Within Your Means
The impact of living within your means is huge on your personal finances.
It can help you feel relief, remove debt, ensure you are saving money, stops you from living paycheck to paycheck, and can help you invest more for your future.
And as you read in the previous section, it can also be challenge to live within your means.
Below are some tips to get you on the right track as well as to ensure you don’t feel like you can’t enjoy spending money from time to time either.
It’s important to note that some of the tips are very basic level items and others you may not have thought of currently. So stick with me!
Remember: living within your means is not about depriving yourself of any joys, it’s more about finding the proper balance to set yourself up for stronger financial health.
1. Know Your Income (Monthly & Yearly)
The first thing you need to really understand is your monthly and yearly income. Too many people guess or think they know these numbers without actually writing them down or calculating.
It’s the easiest way to see where your income is at and where your expenses or spending might be causing trouble.
You’ll also want to know how often you get paid and if there are any bonus amounts you may expect in a given timeframe. This can help you align with your bills or any debt payments better, plus ensure you aren’t spending randomly before paying yourself first.
2. Negotiate Recurring Expenses
If you recall, I mentioned that these tips will help you live within your means without depriving yourself. One simple way to do so is look at some recurring expenses of things you might enjoy.
Maybe you have not cut the cord with cable yet because you really love sports and the programming or looking for cable alternatives.
You can reach out and negotiate lower rates or even switch providers to save money. It might not make a major impact but a couple hundred dollars a year can be helpful.
And if you have a few expenses like this where you can negotiate or switch, the money you save will definitely add up.
3. Rewire Your Money Mindset
Probably one of the more challenging tips is to rewire your views when it comes to money.
That’s learning to master things like needs vs. wants, to stop worrying about what others have, to remove the competition among your friends, and to view money as a tool to help you live a better life, not just to buy stuff.
It can be hard to change because we are programmed to look at material things as a symbol of success and having or doing anything less must mean we are falling behind our peers. Wrong!
The best way to rewire your money mindset is to boost your financial literacy. Start reading financial books, listening to podcasts, or anything that can help you view money and consumerism differently.
4. Start to Shop Smarter
I’m not one to say that you should stop spending money, nor should you feel guilt for buying things for yourself. Of course, there should be moderation to that and the caveat being that you are ensuring your financial goals are met first.
But when you are shopping, be smarter about your approach. You can still get and buy things you enjoy, but still live within your means.
- Use cash back apps like Ibotta or Rakuten to save money on purchase
- Starting looking for deals or comparison shopping. A free browser extension like Wikibuy does the work for you, to ensure you get the best pricing online.
- Save for a bigger purchase first, before using a credit card. If you can’t afford to pay off the credit card quickly in cash, then you can’t afford it.
- Sleep on any major or expense purchase to give your brain time to process. Think about why you “need” something or if it’s more of a “want” that won’t add much long-term satisfaction.
5. Build Your Income
One of the best ways to easily live within your means is by building your income. However, the second aspect to this is that you must ensure you do not increase your spending habits dramatically.
Many times as people increase their income, so do their wants like a bigger home, luxurious cars, and just more frivolous spending overall. This is called lifestyle creep and you’ll quickly realize even with more income that you are living beyond your means.
You can ask for a raise, start to generate multiple income streams, or look for a new higher-paying job and even negotiate the salary offer to maximize impact.
6. Cutback On Things You Can live Without
In some traditional personal finance advice, one of the areas often mentioned is to cutback spend and expenses. Well, yeah!
The problem is for me, it focuses on all expenses which can lead to that feeling of being deprived or limiting yourself.
Instead, I like the idea of cutting back aggressively on things that do not matter to you or that you can live without. This lets you spend on things that bring you some joy, but save money on things you realized never really mattered that much.
Do you like getting a daily latte from Starbucks? Then do it and instead find other areas where you can cutback completely that frees up some spending but allows to still enjoy something.
7. Have A Treat Yourself Day
This is a great way to live within your means, but still not feel deprived of things in your life.
Instead of spending at random times or whenever you want, set dedicated times where you can treat yourself. Maybe it’s once a month, every other, or however you want to set your splurging timeframes.
You can use these times to get excited and spend the day doing things you enjoy spending money on. This way you still get to experience spending money on fun things, but improve your financial well-being at the same time.
And when you do splurge a bit, you still need to have some self-control. The last thing you want to do is spend thousands of dollars and end up racking up debt for a day of treating yourself.
Has it been a struggle for you to live within your means? What steps are you taking to get your finances under control? Any other tips that may have worked for you? Let me know in the comments below!