How to Live Below Your Means when Money Is Tight

The phrase “living below your means” can be confusing. A simple definition might include things like:

  • Having money left over after your all expenses are paid.
  • Consciously choosing to spend less than you make.
  • Making sure your outgoing expenses are less than your income.

In addition, living beneath your means: less stress.  You have confidence that you will meet your expenses and still have money left over.

However, in an age of rising prices and record inflation, living below your means and saving money can seem daunting, especially if money is tight. But, It can be done.

For more information on the steps in this post, watch our video.

If the whole idea of living below your means is a little hazy in your mind, there are actually some practical steps whichwill allow you to consistently spend less and save more.

To illustrate, I’ll share our story of how (and why) we lived far beneath our means.

In the fall of 2008, a drug dealer ran through our front yard at 3:30 in the afternoon. Seconds later, a police car rounded the corner. Our kids had just come in from playing in the front yard.

We decided that we needed to “get out of Dodge” as soon as possible.

We had been living below our means for years. We were debt-free. The house mortgage had been paid off for ten years.

We had a nice amount of money set aside to purchase another home, but, we decided to double-down on what we already knew to do and live under – way under – our means to save up enough cash to move to a new home debt-free as soon as possible.

For the next 20 months we saved 37% of our income, adding $30,000 to our home replacement fund and paying cash for our current home.

Using this as our example on living below your means, let me explain exactly how we met our goal.

1. Start With Your “Why”

This is just a sneaky way of saying the word, “goals”. You have to have goals to help keep you on track.

Living on less does not come naturally to most of us. It takes hard work and dedication, which begin with having a game plan and a goal in mind.

Creating a vision board can be really helpful. This is simply a poster with images and words which remind you daily of why it’s so important for you to live within your means.

We all make mistakes when it comes to handling money, but when you create written goals, put them where you can see them, and track your progress, you have a much better chance of actually meeting those goals.

2. Use a Written Budget

If your budget is in your head and not on paper, you don’t really have a budget. A written monthly plan, creates accountability and will help stop overspending.

Although creating a spending plan may seem daunting at first, most expenses fall into one of eight broad categories. Once you know those, it’s pretty easy to have a working budget within about thirty minutes.

Start with what we call a “Bare Bones Budget”. This includes all your basic expenses: food, clothing, shelter, and transportation.

This first step will take a load off your mind to know, because you’ll know that you have enough money to ensure you have a place to live and a way to get to and from work.

After all the items which pertain to your Bare Bones Budget are in place, it’s time to plug in the remainder of your expenses. A written spending plan can be created in about thirty minutes.

Once you have that done, it’s time to head to the next step, which is cutting your expenses.

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3. Reduce or Eliminate Unnecessary Subscriptions

This is the easiest place to start when you are trimming your expenses. Look critically at monthly or recurring subscriptions.

Ask yourself these questions about each product or service.

  • Am I using it regularly?
  • Am I using all the resources which come with this service?
  • Is there a way to get it cheaper?
  • Can I purchase a less expensive plan?
  • Do I really need to keep it?

After you answer each of these questions it will become clear if you can reduce the expense or cancel it completely.

4. Avoid Impulse Buying

You may be inadvertently thwarting your ability to live within your means via some simple, every day expenses, which may not seem to be costing you very much. These goal-sucking habits may include things like: eating out, paying for non-essential services, alcohol consumption, cigarette smoking, soda pop, or snack foods from the vending machine at work.

Believe it or not, even money-saving garage sales or thrift stores can be costing you too much precious money each month. Indulging in purchases of items because they are “a good deal” is a common form of the recreational shopping experience.

5. Cut Expenses by 10%

Even though we were already thrifty, we believed that we could still reduce our monthly bills. We carefully went through each of our budget categories and wrote a list of strategies and habits which would allow us to regularly spend less.

Within thirty minutes, we had a written freed up several hundred dollars a month.

Want a look at how cut our spending? Grab a copy of my free eBook, “10 Ways to Radically Reduce Expenses”. I go into depth about some of the methods and provide you with some handy checklists.

6. Track Spending 

Tracking each day’s spending patterns will help you identify areas you can cut back on. Additionally, get into the habit of looking over each receipt to evaluate exactly how you spent that money.

  • Was it spent on items that you truly needed?
  • Did you overbuy or purchase items which you already had at home?
  • Were the items on sale or offered at full price?

This step will, once again, give you even greater clarity on your spending patterns and knowledge of how you need to change them.

7. Avoid Lifestyle Creep 

It’s human nature that when we make more, we tend to spend more. This phenomenon is known as lifestyle creep. When more money comes into our possession, whether that be through a raise a work, a side gig, or an unexpected windfall, we feel the need to spend it.

To combat this urge, put an emphasis on savings. Make plans to save as a part of your budget. Know exactly what your target amount is to save every month.

One way to do this is to automate what you can. To save money off the top of your earnings, establish an automatic savings account with your financial institution. Direct deposit lets you save money, because when you don’t see money you are less likely to spend it.

8. Make More Money

After you evaluate your regular saving and spending patterns, you may realize that you are simply not making enough money. If that’s the case, it may be time to devise ways to bring in extra cash.

Take overtime at your regular job when it is offered or switch to the overnight shift, which often comes with an hourly bonus.

Consider making that hobby into a regular source of additional income. Although there are a number of ways to earn more money, a regular side-gig of something as simple as Uber Eats or a babysitting service can prove to be quite helpful .

Selling unused or unwanted items from your home can not only clear out the clutter, but can also infuse your bank account with a fresh supply of cash.

Finally, when possible, pay with cash. This helps you to have a better handle on spending than paying with a credit card.

9. Reduce Regular Spending

The final area to look at is your regular weekly spending. Whenever possible, groceries, personal care products, and household items should be bought on sale or on clearance.

Buying in bulk can be very cost effective. But, be sure to compare to your regular brand prices and do the math before purchasing.

Focus on free forms of recreation and fun and you’ll soon find that spending time together with friends and family does not have to cost money.

How did living below our means work for us?

Twenty months after beginning our journey in spending far under our income level, we paid cash for our home.

Although we have learned that there’s no magic formula to spending less than you make and it doesn’t happen automatically, the hard work and sacrifice are well worth it.

6 thoughts on “How to Live Below Your Means when Money Is Tight”

  1. I liked your video on 10 things not to buy! We definitely do not buy new cars and can’t understand why people do so! (I guess they fall in love with one and think they can’t live without it!) We have been married 37 years and have never had a new car. Our current two are a 1997 model and a 2002! Thanks for all your videos; keep up the good work!

  2. Hope and Larry! I’ve recently discovered your YouTube channel and find it so inspirational! My husband and I are in our early 40’s and naturally pretty frugal, but have slowly let lifestyle creep eat away at more and more of our monthly income. After finding your show, I downloaded a budgeting app (I tried many and liked ‘Copilot’ best) and am now tracking and budgeting our variable spending. It is amazing how much we can save if we put our minds to it! Love it!

    You both are so wonderful to listen to. I hope you consider posting your audio to Apple Podcasts. It would be a great show to listen to on the commute to work. Keep up the outstanding work!

    • Sydney, thanks so much for watching our videos. We’re so happy you’ve found them helpful. Right now we don’t have plans for a podcast. Two videos on YouTube every week keep us pretty busy.

  3. I haven’t been able to scour all your posts and videos yet, but I learned that my medicines could be cheaper if I did mail order, I got my year to date summaries and found my copays dropped from Sept 2022 $5,574.10 to Sept 2023 $397.36!!!! These are my maintenance drugs, some were new this year in 2023, but the mail order gave me 90 day supplies and most were zero dollars!!


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