How to Live Below Your Means Without Feeling Deprived

Try budgeting your money, getting in the habit of saving and cutting unnecessary costs.
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Written by Jeanne Lee
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Living below your means isn’t just about cutting costs and saving money. It’s about taking control of your money.

What does it mean to live below your means?

When you live below your means, the goal is to spend less than your total monthly income — which means that the money you bring in outweighs your expenses. For example, if you bring in $3,000 each month and are left with $500 at the end of the month, then you are living below your means. The ideal amount to aim for depends on your unique circumstances.

What are the benefits of living below your means?

Living below your means has short- and long-term benefits, which can help bring you closer to financial security. Some of the benefits of spending less than you earn include:

  • Freeing up money to help build an emergency savings fund.

  • Saving more money for big purchases like a vacation, car or home.

  • Putting more money toward retirement or other investments.

Ultimately, when you live below your means, you’re better prepared to handle unexpected expenses like a medical bill or home repairs, and to fund the things that make your life feel full, like travel or donating to causes.

Tips to help you live below your means

Here are our best tips for how to live below your means without feeling like you’re missing out.

1. Create a plan for your money

The act of assigning a job for every dollar can be empowering. The popular 50/30/20 budget divides money into the categories of needs, wants, and savings and debt repayment. One alternative to the 50/30/20 budget is the 60/30/10 budget, where you allocate 60% of your monthly income toward your needs, 30% toward wants and 10% toward savings and debt repayment. Divvying up your income in this way may be more realistic for those with a high cost of living.

No matter which budget you choose, it’s important to have a plan for your money, which can help you better manage your expenses and see where you can cut costs.

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2. Automate your savings

If you’re tempted to spend money as soon as your paycheck lands, consider automating your savings. For example, you could determine an amount to transfer from each paycheck into a high-yield savings account, which tends to earns more interest than a standard savings account. You can also automate your 401(k) paycheck deductions at work, or set up automatic monthly transfers to an investment account.

3. Pay yourself

When you finish paying off something, whether a smartphone, car or college education, continue making the same monthly payments you’re accustomed to — but direct them to yourself. Stash the money in a high-yield savings account and let it accumulate. The next time you want to buy something, you can pay cash — and feel the opposite of deprived.

4. Live off one income if possible

Many dual-income families naturally budget their lifestyles based on money that two jobs bring in. But consider the benefits of making a conscious choice to live off just one salary. If it’s possible, arranging your household costs so just one person’s pay covers the bills provides significant financial freedom.

Earmark the second paycheck for maxing out retirement savings, investing or paying off debt. It also provides flexibility for life events like an unexpected job loss or having one parent stay home with young children for a time.

If you decide to try to live on one income, here are some things that may help make it easier:

And if it’s not sustainable for your family to be a one-income household, you can still use the tips above to lower your monthly expenses.

5. Look for ways to lower your discretionary expenses

Are you eating out too frequently, subscribing to boring cable channels or paying for unused memberships? Consider eliminating services that you don’t use often to free up money for things you truly enjoy. If eating out is one of the things you enjoy, give yourself a set budget for dining out and look up recipes to make your favorite meals at home the rest of the time.

6. Reflect on your financial habits

It’s not easy to shift your behavior when it comes to money, and if you want to reduce your spending, it won’t happen instantly. But reflecting on your relationship with money and your financial habits can help set you up for success.

Try this: Write down what you value in life. Then look closely at your last few financial statements. Do your purchases match your values? You might find that small changes can help you stop spending money on nonessential items.

7. Drive used

Do you really need that brand-new car that loses 20% of its value as you drive it off the lot and comes with a $500 monthly payment? Purchasing a previously owned car, and paying cash, means you skip the stress of an auto loan on top of other expenses of car ownership.

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8. Pay less interest

If you carry balances on high-interest credit cards, consider consolidating your debt to save on interest. With good credit, you might be eligible for a balance transfer credit card at 0% interest for 12 months or longer. Just watch out for transfer fees, and transfer only an amount you can afford to pay off before the introductory period expires and the rate jumps.

Or refinance with a low-interest personal loan from a credit union, bank or online lender. With less interest to pay, you’ll have less debt and be able to contribute to other meaningful goals faster.

9. Look for help

You may need more help if you're struggling to pay for basic expenses, like utilities. Learn about ways to save on a tight budget, including getting support and negotiating with service providers.

You can also explore free or cheap financial advice from your local bank or credit union or look into pro bono financial planning services from an organization like the Foundation for Financial Planning.

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