Living below your means is spending less than you bring home and keeping the difference. That’s really all it is.
The gap between what you earn and what you spend is the only money you can save, invest or throw at debt. No gap, no progress, no matter how much you make.
If you’ve ever bought something you couldn’t afford and felt the guilt right after, you already know why this matters. Here are nine ways to spend less and save more, starting with the easiest ones.
1. Pay Yourself First
When you finish paying off a bill, don’t go shopping with the freed-up money. Keep making the same payment, only now it goes into a savings account that pays interest.
You won’t miss it, since you’re already used to that money leaving your checking account every month. Set it up as an automatic transfer on payday and treat it like any other bill.
2. Track Your Spending With an App
You can’t cut what you can’t see.
A budgeting app pulls your accounts into one place and shows you where the money actually goes, which is usually not where you think.
You don’t have to pay for one. Empower has a free dashboard that tracks your net worth, your cash flow and your spending by category. A spreadsheet works too if you’ll keep it up.
Either way, look at it once a week.
3. Increase Your Income
Spending less is only half of it. The other way to widen the gap is to make more.
That could be freelancing, a weekend side job or a small business of your own. If you don’t have time for any of that, ask for a raise. It’s intimidating, but an offer letter from another company makes the conversation a lot easier.
And when you need money quickly, there are legit ways to do it. Here’s how to make $200 in a day from side hustles.
One warning. A raise only helps if your spending doesn’t rise with it.
4. Make a Plan Before You Leave the House
Most overspending happens when you’re out. Food, gas, the thing you walked past and suddenly needed. So decide before you go: what are you buying today, and about how much will it cost? This isn’t a strict budget. It’s a quick plan for the day, and it’s a lot easier to stick to than a spreadsheet with 30 lines on it.
5. Go Easy on the Credit Card
It’s easy to tell yourself you’re building credit.
And you are, as long as you pay it off.
The problem is that a card makes it simple to lose track. You swipe all month and the total doesn’t feel real until the statement shows up. If that sounds like you, keep the card out of reach and pay with debit or cash for a while.
If you do use one, a common guideline is to keep your balance under 30% of your limit, and to pay the statement in full so you never pay interest.
6. Consider Downsizing
Housing is the biggest bill most of us have, so it’s where the biggest savings are.
A two-bedroom apartment for one person might be more than you need. Check your rent to income ratio, and when your lease is up, see what a smaller or cheaper place nearby would cost you.
You could also split a house with friends or move to an area with a lower cost of living. Think through taxes, your job and moving costs before you relocate, since those can eat the savings.
Buying? Don’t buy the most expensive house a lender will approve you for. The mortgage you qualify for and the one you can comfortably pay are two different numbers. If you’re not sure which way to go, here’s how to think about whether to rent or buy.
7. Rethink Your Transportation
A new car burns through money faster than you’d think, between the payment, the insurance and how quickly it loses value.
A used car gets you to the same places for less. If you can pay cash for it, even better, because you skip the loan and the interest. For a lot of people the car is one of the biggest expenses after housing, so getting by with one car instead of two, or taking transit for the commute, is real money back every month.
8. Cut the Small Recurring Expenses
Coffee runs, subscriptions and random shopping trips don’t feel like much. Add them up for a month and you might be surprised.
Go through last month’s bank statement and look for these:
- Subscriptions you forgot about or barely use
- Four streaming services when you watch one
- Daily coffee runs a coffee maker would cover
- A phone or internet plan you haven’t called to renegotiate
None of these will change your life alone. Together they can leave you with a nice chunk of change by the end of the year.
9. Avoid New Debt
Financing something isn’t the easy way out. It feels cheaper because the payments are small, but you usually pay more in the end once interest is added.
If you don’t have the money for a big purchase, wait and save for it. Some financing plans carry high interest rates, and every new monthly payment makes the gap between what you earn and what you spend a little smaller.
Bottom Line
Bottom line: living below your means takes some discipline, and the first couple of months are the hardest.
But the payoff is real. You build an emergency fund, you stay out of debt, and you have money to put toward retirement. Pick one or two of these to start with and add more once they stick.