Living below your means is not just about trying to reduce your expenses and saving money. It is also about taking full control of your financials so it doesn’t get you into trouble like getting you into debt. Learn how to live below your means.
When you live below your means you will be able to handle emergencies in a calm manner instead of running here and there to “gather up” some money (through borrowing by the way).
A good rule of thumb is to save at least 10% of the money you earn. But if you wish to take if further, you can save 15, 20 or even 30 percent of the money you earn. Below are some of the best tips to living below your means without feeling like you’re missing out on all the fun stuff.
Budget your money
Create a plan for your money. How much will you spend and how much will you keep aside for emergencies. You can use the 50/30/20 budget. This budgeting model actually means:
- Needs = 50%
- Wants = 30%
- Saving = 20%
Save before you get your paycheck
Discuss with your company accountant to have a percentage of your paycheck sent to a different saving account where you won’t touch it. So when you get your paycheck you would have already saved some money.
The IRS is already doing it to you, you can too.
When you are done paying something off, like your smartphone or car, continue making the same monthly payment you are already used to – but this time you pay them to yourself.
Put the money in a savings account where you can get some interest on it and let it build up.
Live on just one income
I’m not saying you should have only one income. In fact I think everyone should have more than seven sources of income. What I’m saying is that you live off just one source of income and save the rest to let it accumulate in interest or use it to buy a business or start a business.
Stop meaningless expenses
Do you frequent restaurants and fast food joints or pay for some membership you don’t use? Eliminating these type of costs will free up your money for more valuable things you’ll enjoy.
Drive used cars
Do you really need to drive a brand new car that loses 20% of its value as soon as you drive that car out of the parking lot and comes with monthly payments?
Buy a good used car that already has some miles on it. Pay cash. This means you will skip the stress of a car loan in addition to other expenses of car ownership.
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 be free of debt and on to other meaningful goals faster.
Take a look at your expenses and see where you might be throwing money away. Then try to fix it.
Manage Your Money Better
Below are some personal finance books I recommend to help you save more money. They have helped me a lot and I'm sure they'll help you in your journey to financial freedom.
- The Compound Effect by Darren Hardy
- Total Money Makeover by Dave Ramsey
- I Will Teach You to Be Rich by Ramit Sethi
- Master Your Money (Super Bundle)
- Need an extra $2,500? Get loans up to $5000
- Are you in debt? Get free debt consultation and find a solution to your debt
- Unshakable: Your financial freedom blueprint
- The New Money Masters
- Tools to make money in tough economic times
I have read about 5 out of the 7 books and I can boldly say they have helped me handle my finances better. I believe in them because they have helped me in my financial journey and I think they’ll help you too.