What Does it Mean to Live Below Your Means?


Living below your means is one of the wisest financial decisions you can make for yourself. It allows you to take control of your money and increase your chances of reaching financial freedom.

If you manage your livelihood through monthly paychecks and are concerned about your future financial security, you may wonder if it is possible to change your current circumstances. The solution lies in living a balanced lifestyle that you can afford well within your means and have some money left at the end of the month that you can utilize to fulfill your long-term aspirations.  

What Does Living Below Your Means Entail?

Living below your means is spending less money than you earn every month. For instance, if your household income is $7,000 and you manage your expenses at $6,000, you are left with $1,000 at the end of the month that you can save or invest.

There is no hard and fast rule for what amount of money qualifies as living below one’s means. Regardless of your income, you are living below your means if your spending is less than your earnings. If you earn $5,000 and spend $4,500, it suggests that you live $500 below your means. 

How To Know If You Are Not Living Below Your Means

While living below your means mostly reflects your spending habits, it is not limited to that only. It is also about organizing your finances and saving or investing your money. It is about taking control of your money instead of letting your money control you.

However, if you are constantly stressed due to financial matters, it suggests that you are living beyond your means. If you are using credit cards and are unable to pay the full balance each month, you are likely to have credit card debt. Similarly, if you are not prepared to cope with any emergency, do not follow a budget, and spend without thinking, you are certainly living beyond your means.  

If you feel overwhelmed by this lifestyle and want to turn things around for a more financially secure future, here are a few tips to help you understand how to live below your means.

Evaluate Your Current Expenses And Cut Back On Unnecessary Spending

To start living below your means, the first thing you must do is to evaluate how you are spending your money currently. This includes accounting for recurring monthly expenses and the non-essential expenses that can cause overspending. 

Once you have a fair idea of how your money is spent, you can take measures to curb unnecessary spending. This may include avoiding excessive expenditure on groceries, impulse shopping, frequent dining out, and giving up on subscriptions or memberships you do not need, etc. 

Make And Follow A Budget

Making a budget will give you a clear idea of how to allocate your income to various expense categories. An effective budget will allow you to divide your income between your expenses, savings, and any future financial goals. Following the budget will prevent you from overspending on a certain category and keep your expenses in check. 

Avoid Using Credit Cards

Credit cards are a useful financial tool, but if you are using them as an extension of your income, you must stop. Ideally, you should use credit cards to spend only the money that you have. 

While it is acceptable to use a credit card to pay for expenses within your means, it is not acceptable to use it to buy something you cannot afford. This will only result in you getting stuck in a spiraling credit card debt cycle. The money used to pay its interest could otherwise be spent on a lucrative opportunity that could be beneficial in the future. 

Put Some Money Into Savings

Besides managing your current expense, you may also want to ensure that you save money for important future aspects like buying a house, making an emergency fund, or saving for retirement. 

If you consciously cut down your expenses, you can allocate more money to your savings, ultimately enabling you to cope with unexpected expenses or help you build wealth for a stable future. Set saving goals and monitor your savings to ensure accountability and to stay on track. 

Make Lifestyle Changes

Another way you can reduce your expenses is to make lifestyle changes beyond cutting back on your grocery bills or non-essential expenditures. This could include downsizing your home to reduce rental expenses or insurance, taxes, and maintenance expenses if you are vying for ownership. Similarly, consider getting a used car instead of the latest model to avoid making hefty monthly payments. 

Increase Your Income

If your current income does not leave room for savings and you find it hard to manage your current expenses despite careful budgeting, consider ways to generate additional income streams. You could start a side hustle to make extra income without significant time commitments or upfront costs. You could also invest in stocks, bonds, etc., to generate passive income. This way, you can earn extra without having to put in active effort.


By now, you may have a fair idea of what it means to live below your means and what steps you can take in this regard. You do not need to be frugal to save money, but you need to be mindful of how you spend it and make changes to your current spending pattern. 

These small changes can significantly impact your future as you can set tangible goals to achieve through the money you save by careful planning. From planning a vacation to buying your dream house, your future goals seem achievable once you start working towards them.