How to Live Below Your Means to Achieve Your Financial Goals
The concept of living below your means sounds easy enough. In reality, it can actually be quite difficult! Especially with the rising cost of living.
A quick definition: To live below your means, you must not spend more money than you earn.
But maybe you are struggling to make ends meet.
Never mind saving money each month.
That doesn’t stop you from having financial goals though. They’re still at the forefront of your mind. You just don’t know how to achieve them. That can feel pretty discouraging.
Today, I’m here to add hope to your financial future. Your current situation doesn’t have to be your situation forever. Life situations always change!
Before we get started on how you can achieve your financial goals, I’ve got a couple important things to touch on. It can be beneficial to pin point exactly why you are struggling.
There are various reasons why you may be having troubles living below your means:
- You were never taught how to manage money (It’s never too late to learn!)
- You don’t budget
- Not enough income
- Spending is easier than saving
- You’re trying to keep up with the Jones’
- Lifestyle inflation (Your expenses increase along with any increase to your income)
- Everyday expenses are rising (inflation)
- You want instant gratification (training yourself to have to cash first before a purchase can feel just as satisfying.)
The truth of the matter is, most of us simply don’t have enough money to purchase everything we want, as soon as we want it. Self-discipline and planning are key in creating good spending habits.
If you want to achieve your financial goals, living below your means will help you immensely. Here are some strategies to help you achieve success.
1) Set realistic financial goals
When you set realistic and achievable financial goals, you are more likely to stay motivated and self-disciplined. Here are some examples of realistic financial goals you can set:
- I will save up $500 in my savings account in the next 12 months.
- In the next 12 months, I will pay off $600 in debt.
- In the next 12 months, I will only spend $400 on clothes and shoes.
The goals in the examples above have a time limit set on them and are specific in nature. The amounts are achievable.
The best thing to do is to focus on only 1 or 2 financial goals at a time to ensure your success.
After you set the goals, set an action plan that specifically says how you are going to accomplish those financial goals. For example, if you focus on the “I will save up $500 in my savings account in the next 12 months” goal, you can set the following specific action plans:
- Cancel $10 Disney+ subscription for the next 12 months. (Savings: $120)
- I will save $12.50 from each paycheck for the next 12 months. (Savings: $300)
- Save $80 on clothing expenses for 1 year by buying items second hand. (Savings: $80)
Total Savings: $500
Once you’ve set your action plan, review your goals and action plans often enough to make sure you are staying on track. Once you see the progress you are making, you may find yourself extra encouraged to keep going!
2) Create a budget.
Living below your means requires you to build self-discipline with spending. To be disciplined with money, you must be organized with your earnings and spending.
A budget is the way to track how much money is coming in and how much money is going out each week, biweekly, or monthly.
You don’t need anything fancy to get started with a budget. I have a free monthly budget form you can get that will be a helpful starting point.
Or if you want to go all in with creating a budget, my $9 Budget Planner is a great, easy way to track all aspects of your finances.
Or even a simple Monthly Budget Spreadsheet from Etsy will be a great tool.
A budget is not a set and forget thing though. Be diligent about checking in with your budget at least once a week to make sure you are on track with your spending.
Side note: A budget often takes away the feeling of guilt when you spend money on a wanted item because you know it can fit within the budget.
3) Practice delayed gratification.
Currently, I’m saving up for a Fitbit. Not because I need one, but because I want one. I have been selling some of our unwanted items and saving some cash I earn from Simply Frugal.
This is where self-discipline comes in handy again in regards to your spending habits. Save cash for the unnecessary, but enjoyable things you want to get.
Let’s say you want to get:
- A new smart watch
- A new tennis racket
- A new kitchen faucet
- New furniture for the living room
These are not essentials, but things you want to have to make life a little better! If you are on a tight budget, it’s important that you save before you buy. Don’t make that purchase until you have enough saved to make the purchase. Delayed gratification can feel amazing, especially since you don’t have to worry about paying off the item(s) you purchased!
These purchases can also become one of your financial goals. So set the goal with a time frame and create the action plan on how you are going to achieve your goal like I outlined in strategy number one above.
4) Put money aside for emergencies.
Without having money put aside for emergencies, and replenishing it after use, you are risking the chance of racking up some debt. In other words, you may have to borrow money in order to be able to afford the unexpected expense.
Have money put aside for emergencies by saving enough to cover things like:
- Repairs on a often used appliance
- Replacement of a hot water tank
- Replacement of a computer
You can decide how much is right to have set aside. I suggest at least $500, but $1000 or $2000 are even better. Once you set an amount, you can start the saving process by setting your goal and action plan.
Having an emergency fund in place will help you to live within your means because you will not spend unbudgeted money when an unexpected need arises.
In conclusion, it takes consistency, self-discipline and organization to achieve your financial goals. The more you practice, the easier it will be to develop strong spending and saving habits. Living within your means will help you:
- Save more
- Ride the waves of inflation better
- Feel less stress
- Have more financial security
- Be financially content
- And more
The strategies in this article will help you to live within your means and achieve your financial goals.