When I shifted to Delhi for higher education back in 2011, I used to get $150 every month to pay for my monthly expenses. It roughly translates to a little over 11,000 INR, an amount that would pay for the hostel rent, food and other expenses. Although it wasn’t that big an amount, I still managed to have some savings in the five years that I lived away from home for studies. You can call me a miser, but I promise I didn’t feel deprived even when saving money wasn’t my prime focus back then. I used to hang out with my friends and go shopping when I needed to and I never felt that I wasn’t enjoying life. Those days made me realize that living below your means doesn’t necessarily mean that you aren’t living your life to the fullest.
To live below your means doesn’t mean that you have to comprise on your needs and wants. Living below your means is more about living your present in a way that your future is well taken care of. It’s largely about making your future financially secure by taking control of your finances today. It also means that you can still spend money on things and activities you enjoy doing but you should refrain from splurging at the cost of your financial health.
As a basic rule of living below the means, I make it a point not to spend more than 80% of my monthly income. You don’t have to follow this as a general rule but you’re well within your means if you are able to save at least 10-15% of your income every month.
There are many benefits of living below your means, the most important of which is having a cushion of savings to protect yourself from a financial blow. And if you are looking to find financial peace, here are some great tips that can help you live a comfortable life while staying within your means:
1. Make A Budget – Budget is the most important tool if you are serious about saving money by living below your means. A budget is something that tracks your income and expenditure thereby keeping you from being broke. It helps you allocate your monthly income to the many expenses that you have to incur during the month.
Take, for instance, a situation where you put the following list of necessary expenses in your budget:
- Groceries – 20%
- Electricity, Gas & Water – 15%
- Rent – 25%
- Other expenses – 5%
Now suppose your wants (the remaining 35% of your income) include a Netflix subscription, gym subscription, cell phone and internet plan, entertainment, eating out and travelling.
While the above scenario helps you live a comfortable life, the fact that all your income is used up by the end of the month isn’t a great situation to be in. This clearly implies that you have been living within your means but are not able to save anything. Ask yourself how long you are comfortable living without savings.
Taking a close look at your budget will help you understand what all expenses you can do away with to save money that can take you a step ahead to your financial goals besides helping you repay your debt.
Is your gym subscription going underutilized? Won’t it be better to cancel the subscription and rather put the amount in your savings account? Can you switch to a cheaper cell phone plan? How much money would be saved by cancelling the subscription of the magazines that you haven’t read in months?
You’d be surprised to know how much money you can save on groceries by doing advanced meal planning and using leftovers as much as possible. Consider the idea of eating out less often and shifting to a less expensive rental space. Remember that the very essence of living below your means lies in saving at least 10-20% of your monthly income while optimally using the rest to pay for your expenses.
2. Do Away With Credit Cards – Credit cards have made it easier to spend money you don’t have. It seems amazing to buy anything in a swipe of a card but what might haunt you later is the huge interest rates and credit card fee that comes with it. In order to save money by living below your means, ditch that credit card for good and use cash as much as possible.
3. Control Your Spending Habits – Take it as a must to cut down on mindless spending as much as possible while also tracking where your money is going. If you are an impulse buyer, consider sleeping on the idea of buying things before actually buying them. You might realize that you don’t need that piece of clothing you gave your heart to in the shopping mall. Besides that, there are many things that are an outright waste of money and you will be able to save a lot if you can switch to the cheaper alternatives.
4. Save, Save And Save! – Make savings your ultimate goal if you wish to start living below your means. As a first step, automate your savings so you can’t spend money on things you don’t need. Tell your friends that you are trying to save money and that you would want to hang out in places that aren’t too expensive. Even better, invite them over to your place and go for some in-house entertainment.
5. Try Bringing In Some Extra Cash – If you are already too frugal with your lifestyle but haven’t been able to save any money, try boosting your income. You can consider starting a side hustle to make extra money, work a second job or switch to a better paying job. You can also take a freelancing gig to work at your own comfort apart from working your regular job.
6. Live On One Income – If both you and your spouse have been bringing in money, consider creating a budget that allows you to live off one income while saving the second. If you are a dual-income family, the idea of living on one income can help you achieve financial freedom sooner than you think.
7. Track Every Small Purchase – If you are serious about saving money, it’s important to track your spending habits so you don’t end up extending yourself off the budget. It’s like a conscious reminder to yourself to avoid spending money on things you can do without. Since the age of 17, I have recorded every single expense incurred on my part and it has helped me a lot in controlling my spending habits. For example, every time I would spend $2 on that bottle of water and record it in my diary, I would be reminded of how much money I could have saved by carrying water from home.
8. Downsize Your Living Space – I know that it’s easier said than done. Moving out of your house isn’t an easy decision to make given that it holds a lot of memories created through the years. But there are many expenses that have to be accounted for when you are living in a big house – maintenance, utility, home improvement and rent. Shifting to a relatively smaller space can help you cut down on these expenses besides saving you money for rather important financial goals – retirement, debt payoff and children’s education.
If you aren’t a big fan of living paycheck to paycheck and have been trying to break the cycle of running out of money at the end of every month, you can start by following the above tips. Change won’t happen within a day. The journey of living below your means would be slow but when you’ll see money adding up into your savings account, it will all be worth it.