Live Below Your Means : 14 ways to live below your means

What is live below your means?

Live below your means simply means spending less than you earn. In other words, if your income exceeds your expenses, it means that you are living below your means.

It looks easy to keep your expenses low compared to income in the theoretical world, but many people face many problems implementing it in their practical lives. They make some common mistakes due to which they fail to live below their means.

Money in hand
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This article will discuss some tips and suggestions that you can implement to live beyond your means. So a lot to know, a lot to discuss, and without wasting any time, let us now begin.

Things we discuss

In this article, we will discuss the following things in detail. Click on the part you want to read, and you will be skipped to that part.

Benefits of living below your means

Living below your means is not just about saving money. It’s about building wealth over time. Saving money is the first step in building wealth. You need to put money into savings or investments to build wealth.


The benefits of living below your means go beyond the ability to save money. Living below your means can also help you avoid debt, making it easier to reach financial goals. If you don’t spend less than you earn, you can’t build wealth over time. Saving money is the first step in building wealth. Debt can make it harder to reach financial goals.

It’s not always easy to live below your means. You may have to sacrifice in the short term, but it pays off in the long term.

14 Tips to live below your means

#1 Analyze your past month Income and expenses

First of all, sit and analyze your past month’s revenue and expenditure. You need to record each and every expense you made in the previous month. It includes every small to small expense you make.

After expenses, start analyzing your income. Analyzing income is a very easy task for most people because the majority of the people are either salaried employees or have only one income source. Now simply deduct all the expenses from income.

If the answer is positive, it means that you are already living below your means, and you do not have to do anything else. Still, if the result is negative, it means you face an income deficit and fail to cope with monthly expenses in the current income. Hence, you need to either increase your income or reduce your expenses to the deficit to live below your means.

Analyzing income and expenses is very important because it sets a target in your mind, which helps you to make future plans and predictions. It means this step is very important because it is the base of your upcoming steps. So you must follow this step properly. But if you face difficulty in recalling or analyzing your past month’s income and expenses, then you can wait for a month and start recording all your expenses in a proper place.

I personally recommend you record all the expenses in a mobile application because nowadays everyone carries a mobile phone in their pocket which gives them the facility to record the transactions on the spot.

You might think that waiting for one month for recording expenses is just a waste of time, but it is not because living below your means is a very important component of personal finance, and great grip and knowledge on personal finance will help you to achieve great financial future in the long term. It also helps you to increase your credit score, which will create goodwill in the market.

So do not hesitate to spend a month recording all the expenses because it will help you a lot in the long term.

#2 Make a budget

After analyzing all the income and expenses, now focus on preparing a budget. A budget is simply a type of financial statement where you anticipate your upcoming month income and expenses. Since your main aim is to live below your means, you need to either increase your income or reduce your expenses.

In the long term, increasing income is the only way to live below your means, but it is also true that increasing monthly income is not a one day task. You need to spend a lot of time and gain some useful knowledge to increase your income.

So in the short term, to achieve the targets, you need to reduce your expenses. Reducing expenses does not mean eating less to save money. It means avoiding every unnecessary expense which does not impact your daily life. Expenses on the parlour, makeup, golf clubs, regular trips, expensive food items etc., are such things that will not impact your life at all, but avoiding them will definitely have a huge impact on your life in the long term.

You may think then, what is the purpose of earning if I cannot spend on comforts? You are absolutely right, but it is also true that you currently face an income deficit and fail to cope with your monthly expenses. Believe me, this is just a matter of time. After a maximum of 2-3 years, you will never face problems living below your means and can spend as much on comforts as you want.

You have to decide whether you want to continue your current life or sacrifice some luxuries today to have a prosperous and wealthy future. A wise man will definitely sacrifice today because he knows that today’s expensive items will not benefit him tomorrow.

So if you can sacrifice such luxuries, then you continue reading this article. Otherwise, it does not make any sense to read it.

#3 Start negotiating

If you have eliminated all the luxuries, then still there’s a possibility that you may fail even to fund your necessities. In that case, you need to use different methods to reduce your expenses, and negotiating is a technique you can use.

It is impossible to negotiate in malls or departmental stores, so you can start purchasing items from street vendors or small shops. If you are a good negotiator, you can easily reduce your expenses by 10-15% because it is very easy to negotiate with street vendors compared to large shop owners. After all, street vendors do not need to bear any fixed cost.

Fixed cost means the cost you need to incur for starting the business. Since large shopkeepers need to bear rent costs regularly, they cannot afford to negotiate to run a profitable business. The same thing is with malls. Shopkeepers in malls and department stores pay a lot of money for renting that place. Also, they need to bear electricity and maintenance expenses which makes it difficult to reduce prices. That is why most of the things in malls are available at MRP.

On the other hand, a street vendor bears very less or no rent and maintenance costs. They just buy items from wholesalers and sell them to you. Also, they do not bear any advertisement expenses, making it very easy to negotiate with them and save money.

#4 Purchase in bulk

Another way to save money is purchasing in bulk. You can purchase all the durable goods in bulk at a time from a wholesaler or distributor, which will help you to save a lot of money because purchasing in bulk allows you to eliminate intermediaries like retailers, which means you can easily buy a durable item even up to 50% discount if you buy it in bulk.

For your information, a durable item means any item having a long life span or long shelf life like sugar, onions etc. Long shelf life is an important criterion before buying anything in bulk because it ensures its usage even after a significant period.

For an additional discount, you can use some online payment methods, which will provide you with a fixed percentage of cashback on every purchase. This fixed percentage of cashback will definitely help you save a lot of money in the long term.

#5 Record every expense

Accounting or recording every expense is very important to maintain and adjust a proper budget. Your budget likely fails in the first month; in that case, you can adjust your budget expenses accordingly if you have maintained a proper record of all the expenses.

You may ignore some minor expenses and those expenses at the end. For example, if you eat ice cream for $2 three times a day, it simply means you are spending more than $180 every month on ice cream. Now, this $180 may not look like a huge amount, but a person makes such small expenses daily, resulting in huge expenses and preventing you from achieving your monthly targets.

So record every expense which you made in your life for maintaining and adjusting a successful budget regularly.

#6 Prepare an emergency fund

We all know that life is the most uncertain thing in this world. Any mishappening can happen anytime in your life. So it is better to prepare in advance and maintain a fixed emergency fund to compensate for uncertainties.

You can also take insurance for meeting uncertainties. I recommend my readers take health insurance because one disease can utilize your savings and trap debt. A debt trap simply means a situation where you fail to pay one loan and take another loan at a higher rate to repay it.

Apart from health insurance, you can also take fire and theft insurance if you are a businessman. Personally, I do not recommend taking many insurances because it will increase your monthly expenses, making it difficult to make a proper budget and cope with expenses.

To maintain an emergency fund equivalent to at least your one month salary, take some important and necessary insurances to ensure financial security.

#7 Avoid financial blunders

If you follow all the above steps but make some financial blunders, it does not make any sense. Financial blunders simply mean huge financial mistakes that nullify all your efforts in the past few years. Sometimes people put their emotions above thinking which conveniently makes them make one of the saddest financial decisions of life.

Like much middle class or lower-middle-class families, they make a lot of sacrifices to survive and save money. They can even sacrifice their daily needs to save money, but when it comes to hosting any function like children’s wedding, 25th anniversary, etc., they can spend all their savings and even take a bank loan to show off in front of their friends and families. Some people even spend their 10 years’ gross savings just hosting a 1-2 days children’s wedding. These blunders alone can make their previous sacrifices useless and make their situation as it was 20 years ago.

Most people even face difficulty meeting their living expenses and living below their means after hosting a major function. So always avoid hosting a major function until and unless you are financially independent and are capable of doing so; otherwise, these functions make you incapable while living below your means.

#8 Avoid using credit cards

If you are a person between 25-35 years, then there is a lot of chance that you own a credit card. If you also own a credit card, then simply burn it today and stop using it. I am not saying that credit card is a bad thing, not at all. Most people also save and earns a lot of money by just using a credit card. Still, if you face a problem living below your means, then a credit card can be its probable reason because it gives you the facility to buy things even if you cannot afford it.

In simple words, a credit card is just a short term loan that you need to repay after a fixed period. In case you failed or forgot to repay it, then you have to bear interest rates. These interest rates are too high compared to a typical bank loan, making it very difficult for users to repay it. Credit card debt is one of the most common reasons most people get trapped in a debt trap.

So if you are facing a lot of problems in preparing a budget and living below your means, you should stop using a credit card for a better future.

On the other hand, if you currently do not use any credit card and have faith that you did not misuse it, you can also use it to save a lot of money because many e-commerce and banking companies give special discounts to customers who make payments through a credit card. Some companies even give a fixed percentage of cashback on every transaction you do use their credit cards. So you can also use a credit card to save money but always use it in a proper and useful manner if you want to avoid any debt trap situation.

#9 Invest excess money

If you follow all the steps mentioned above properly, you will definitely live below your means. But in the worst-case scenario, you will not cope with your budget if you lose your income source. We have discussed the ways to manage your expenses in the budget to live below your means which is effective in the short term.

But in the long term, it is always recommended to create multiple income sources to survive in the worst-case scenario. So start investing all your money in the stock markets, mutual funds, SIP, equity, innovative businesses, etc. You might be a beginner in investing, so you should start with index funds. Index funds invest in multiple company stocks, which makes the risk negligible and almost ensures a constant rate of return in the long run.

The rate of return depends on the country to country and market to market, but in the long term, almost every index fund gives a massive return due to the compounding effect. So at least invest 20-30% of your money in index funds in the long term to earn huge returns.

#10 Gain income-related knowledge

Now simply start gaining income-related knowledge. You might be a beginner today, but you should aim at becoming an expert tomorrow. You can gain financial income by reading books related to passive income, businesses and investing. Many good authors like Robert Kiyosaki gave financial knowledge in their books like Rich Dad Poor dad in very simple words.

Gaining financial knowledge is very important in achieving financial freedom, and all of us want to become financially free and focus on other important aspects of life. You can gain financial knowledge in any manner by attending seminars, watching videos on youtube, reading finance and money-related books, listening to audiobooks, or any other manner you like.

But it is important to gain financial knowledge regularly to make your mind sharp, effective and efficient in matters related to money and finance.

#11 Focus on multiple income sources

After gaining financial knowledge, start focusing on making multiple sources of income. You cannot rely on one or two sources; you should have at least 7-8 income sources to remain completely protected from the worst-case scenario and avoid all the possible financial emergencies that can come in a normal household’s life.

It sounds easy to create multiple income sources, but it is not at all an easy task. You might fail if you focus on all the income streams at a time, and it is better to make one income stream solid and focus on the other one. Focus on investing in apartments for the initial 1-2 years; afterwards, you can start a home renovation business and hand it over to your employees. You can easily make 5-6 income sources in 4-5 years which plays a very positive role in your upcoming life.

#12 Start earning passively

It is good to have multiple income sources, and it is best to have multiple passive income sources. Passive income simply means earning income without actively participating in it.

Financial independence means complete independence from all financial tensions and needs. You cannot declare yourself financially independent if you cannot survive without working.

There are many ways of earning passively. A person can earn passively by investing in stocks, trucks, real estate, mobile billboards, and many other ways. Passive income is a very powerful thing that can even help a student get financial freedom from parents.

But looking at earning passively is not an easy task. First, you need to spend a lot of time without any income if you want to earn passively. For example, to earn passively from real estate, you first need to acquire some basic knowledge about real estate; afterwards, you need to choose a good broker and spend a lot of time finding and investing in a good property.

You may need to spend 1-2 years earning passively but believe me, one good passive income source is sufficient to boost your journey of becoming financially free.

#13 Achieve Financial freedom

Now you need to repeat the steps again and again till you create 4-5 good passive income sources. Once you do it, then congrats because you have finally become financially free. Now you do not have to care about finance while sleeping and you can easily focus on other important things.

Once becoming financially free, you can easily earn a lot of money while sleeping, which means passively without much effort. Now you can do everything you want, like watching movies, playing video games, going on a date, enjoying yourself with friends, and many more things.

It seems easy to achieve financial freedom, but it is not at all an easy task. Many people try to achieve financial freedom, but they fail because they lack dedication, patience and hard work. So keep hustling to achieve financial freedom because once you achieve it, your income will exceed your expenses, and you do not have to think about living below your means.

#14 Avoid materialistic things

After achieving financial freedom, you can do many things, but I always recommend my readers to avoid spending on materialistic things like land, expensive cars, etc. 

My logical argument is that they are very expensive and can reduce a major chunk of your wealth. Now you might think, what is the purpose of becoming financially free if I cannot spend on luxuries. Let us understand this with the help of an example. Suppose you are now financially free with a total wealth of about 10 Million dollars. Now you have two choices: the first is to buy an expensive car for $1 Million, and the other is to rent cars or travel by taxi.

Now, if you buy a car for $1 Million, you need to ex[ense on its repair and maintenance, and you always feel worried about it because it costs 10% of your total wealth, which is a huge number for every person.

On the other hand, if you rent a car for experience, you drive it with fun without any tension of repair and maintenance. Also, you can easily travel with comfort on taxis for going from one place to another.

So if you think like a wise man, you also believe that spending a major chunk of wealth on materialistic things does not make any sense.

What after that?

Now you are financially free. You have earned a lot of money which is enough for your survival as a rich person for the rest of your life. So now stop spending a lot of time on financial matters and focus on other important elements of life.

It is better to utilize your money in gaining experiences instead of spending it on materialistic things because experiences play a very important role in making a successful life. Without having a lot of good experiences, no one can call his life a success.

You can gain experience by traveling in different parts of the world, experiencing new cultures, making new friends, meeting new people, doing some new adventurous activities, experiencing wildlife, and many more things. You can donate your money to feed poor people, children’s education, and many more things that give you inner satisfaction. A human feels happier and satisfied by helping others instead of spending on himself. If you do not believe this, try it one day and share your experience with us in comment section five below.

Ending Note

We have almost discussed everything which you should do to live below your means. We also discussed the path to achieve financial freedom and the best thing to do after that. So now comes the time to end this article; if you have any queries, feel free to ask in the comment section below. I hope you follow all the steps mentioned above properly and achieve financial freedom in life. Till then, GoodBye, and as always, God Bless You All.

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Frequently Asked Questions

Should I live below my means?

Yes, you should live below your means.

How can I live as cheap as possible?

Spend only on necessities to live as cheap as possible.

What is the main outcome of living below your means?

Financial freedom is the main outcome if your live below your means for a long period of time.

Which book should I read for gaining financial knowledge?

You should read books like Rich Dad poor dad, one thousand ways to make one thousand dollar and the intelligent investor to gain financial knowledge.

What is an example of living below your means?

If your income is expenses given below, it means you are living below your means. For example, if your monthly income is $1000, and expenses are $800 it means you are living below your means.

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