Being financially responsible is important for your health and your financial life. To “live within your means” means that what you spend each month is less than or at least equal to the amount of money you bring in each month.

For many people, it’s a lot easier said than done and here is why.

Credit cards, loans, savings, and even emergency funds allow you to buy more things than your income would ordinarily allow. Unfortunately, that kind of lifestyle isn’t sustainable and, at some point, reckless spending will catch up to you.

Learning to live below your means will help you avoid financial ruin and find the peace that comes with financial freedom. You can do that with the different strategies we are going to talk about in this article.

• How can you Successfully Live Within your Means?
• What are some Habits that can Help you Live Within your Means?
• What are some Spending Strategies to Survive a Tough Economy?
• What are some Strategies for Saving Money?
• What are some Budgeting Strategies?

How can you Successfully Live Within your Means?

1. Know How Much You Make

If you want to live within your means, you have to know what your means are. But simply knowing your annual salary or hourly rate isn’t enough to help you live below your means. You need to know the net income that appears on your paychecks—the amount you actually have to spend.

Read Also: What are Budget Busters?

You also need to know how often you get paid so you can better match the timing of your income with your bills. Since most of your bills are paid monthly, you’ll need to know how much you get paid every month. Multiply weekly paychecks by four and bi-weekly paychecks by two to get your monthly pay.

2. Spend Less Money Than You Bring In

Once you know how much you make, you can focus on reducing your spending to fit your income. If you don’t have one already, create a budget to plan your expenses and use it to keep your spending on track.

If you’ve already tried budgeting and it didn’t work, try it again. Often you just need to make some minor changes to your budget to get it to be effective.

If you want to keep the process simple, try a method called “backward budgeting.” Write down your income, then start subtracting each expense you pay each month. If you get to a negative number, then you’re spending too much and need to cut back.

3. Boost Your Income

If your expenses are at the bare minimum and you’re still spending more money than you make, then you may need to boost your income. If you typically get a tax refund, you may be able to adjust your tax withholding to get more money in your paycheck.

You should also make sure you’re signed up for the right health, disability, and other company-provided benefits. Finally, you may need to get a higher-paying job or even a second job to help make ends meet. Remember, your goal is to live within your means and gain financial freedom.

4. Stop Relying on Credit Cards

Using credit cards to pay bills or cover other living expenses is not a way to live below your means. When you plan your budget, completely rule out credit cards as a way to make ends meet.

Credit cards are unreliable since your credit card company can decrease your credit limit or even close your credit card at any time without warning. If you’re charging more than you’re paying, you’ll eventually run out of available credit. Any interest you have to pay will make it that much harder to live within your means.

5. Don’t Try to Keep Up With the Joneses or the Hiltons

Resist the pressure to have the same material things as the people around you or, worse, the people on television. You may be able to use credit cards and loans to fake wealth for a short period of time, but you’ll pay for it later—and you’ll end up paying more since interest is added to your balance each month.

6. Save Up for Purchases Instead of Putting Them on Credit

People often use credit cards for large purchases they can’t entirely afford, such as a new television. Instead of paying for these purchases on credit, put aside some money each month until you’ve saved up enough to buy it outright. If you can’t afford to save up for the purchase, then you can’t afford to buy it.

7. Build an Emergency Fund

Having savings that’s dedicated to emergencies will keep you from resorting to credit cards whenever you have a financial emergency. An emergency fund of three to six months of living expenses is ideal, but starting out with $100 to $200 will help with some of the minor emergencies from time to time.

Use your budget to figure out what you can afford to save each month, then set up an automatic transfer to make it easier to reach your savings goal.

What are some Habits that can Help you Live Within your Means?

When we talk about living within (one’s) means, it’s important to understand that there are many factors involved in each individual’s unique financial situation that can impact their ability to live within their means.

That said, regardless of whether you’re just starting out, or you’re at the peak of your career, learning to live within your means is always a good goal to strive for.

For most of us, it’s easier said than done. We would all like to have some extra money at the end of each month, but keeping track of every penny can feel overwhelming. Try incorporating these money-saving habits into your life to make saving money just a part of your routine.

1. Track your spending

In the US in particular, it’s very easy to spend money you don’t have–like by putting a big purchase on a credit card when you don’t have the cash to cover it. Creating a budget and learning to only spend money that you have is an essential part of saving.

It allows you to see what’s coming in, what’s going out, and what you have leftover to spend and save.

Start simple. Subtract your known expenses from your income. Then, make sure you budget for variable expenses by looking over your recent bank account activity.

Establishing a habit of monitoring these variable expenses is the best way to see where your money is really going. Check to see what kind of expensive daily habits you’ve got yourself into—outside of the cliched espresso coffee charges.

Are you also paying for parking or ridesharing too often? Are you eating out multiple times a week? Are you paying for multiple streaming services but only using one of them regularly?

While cutting these expenses out completely might not be realistic at first, try curbing your most expensive habits slowly, so you can learn how to adapt without feeling deprived.

2. Automate your bills

Setting up automatic payments for your recurring bills is a great habit to get into. You only have to set up the payments once and then you don’t have to remember to do it each month; it just happens automatically.

In addition to automating your expenses, you can also automate your savings to help you work towards your financial goals.

3. Adopt a positive money mindset

Money often evokes negative emotions, something that is stressful and stops us from doing the things that we want to do. Change up your perspective by reminding yourself—money pays for your home, your food, your fun, and it can give you security and stability.

Remember that money is your friend, not your enemy, and it can either open doors or close them. Adopting a positive money mindset can help you see more opportunities to save money in your daily life.

Ask yourself this question daily to train yourself to have a more positive mindset: How did money benefit me today?

4. Create spending barriers

Prone to impulse or emotional spending? Even if you have every intention to stick to your budget, impulsive purchases–like unplanned clothing purchases, impromptu drinks with friends, or the latest must-have video game, can quickly take you off track.

With online shopping available on your mobile device, it’s incredibly easy to spend money without really thinking about it. With just a tap, swipe, or fingerprint, you can blow your monthly budget in a matter of minutes without having to touch your wallet.

One of the easiest ways to curb impulsive spending is to create spending barriers: Create systems that require you to go through a few hoops before making a purchase.

Here are a few examples of spending barriers you can create to help you live within your means:

• Delete any payment information that has been saved on your computer and phone, so you have to actually open your wallet to make online purchases.
• If you see something in a store that you love, and it’s also available online, wait until you get home before buying it.
• Have trouble sticking to your grocery list? Take advantage of the free in-store pickup that many grocery stores offer, so you can select exactly what you need online (and nothing more).
• Going somewhere you’re prone to overspending? Bring cash and leave your cards at home so you have to stick to your budget.

Creating these kinds of systems will help you curb unintentional spending!

5. Prioritize your savings goals

Saving can become difficult when you only think about the things that you are denying yourself. Make saving much easier by instead focusing on what you are working towards—and then prioritizing those based on what you actually want.

If you’re a Simple customer, a good way to do this is to set Goals, like saving up for a holiday or paying off a car. This will make your goal seem more real, so you will be more motivated to stick with it.

Ideally, as you grow in your career, your income will also rise. As you begin to see more money in your bank account, it’s very normal to start to loosen the reins on your spending a bit.

This is where the concept of ‘living within your means’ can start to be limiting: If your only financial goal is just to spend less than you make, then you can maintain a lot of poor financial habits while still achieving that goal.

Living within your means certainly means something different when you’re making $35,000 and $150,000.

It’s important to continue to revisit, add, and build upon your financial goals whenever your situation changes to make sure that you’re doing what you can to make the most out of your money.

What are some Spending Strategies to Survive a Tough Economy?

 When a tough economy is making it hard to make ends meet, it may be time to rework your household budget. Spending less isn’t always feasible, so you need to make better choices about what you spend your money on and identify your priorities.

Reorganizing your budget can help you get a better handle on your current cost of living and also provide some valuable information about your savings potential.

You can only scale back on expenses when you know what you’re actually spending money on. During tough economic times, keeping track of your daily purchases can help you spend smarter.

Here are five smart spending strategies when enduring a tough economy:

1. Seek out membership deals

Whether you’re shopping for groceries, making a trip to the spa on a regular basis, or planning on traveling a few times over the year, look for membership pricing options to save money. Find a warehouse club that stocks your favorite brands so you can buy in bulk.

Most offer one-day trial memberships so you can scope out the inventory and decide which membership plan will be the best fit for you. Talk to your local spa or salon about membership options so you can pay a discounted fee for services over the course of the year.

Sign up for members-only travel deal sites (most are free) so you can take advantage of discounted travel packages and other travel deals.

Remember that memberships are only valuable when the cost of the membership is justified by the amount of discounts you receive. If you’re not a frequent shopper or buyer, you probably won’t maximize your membership benefits.

2. Overestimate expenses

When you’re putting together a monthly budget, you’ll be better off overestimating how much your groceries, electric, and other variable expenses will be. This approach can actually reduce some stress about money because you won’t feel chained to a low number.

Overestimate variable costs by 10 to 20 percent. Report your actual expense for that item in a separate column and figure out how much you ended up saving that month. Any extra funds can be put right into your savings account for that month.

3. Buy used

If you’re in the market for a new car, a new computer, or just need some new furniture within the next couple of months, seek out used merchandise available in your local area to save on costs.

Buying new could put a big dent in your budget and wipe out most of your savings. Play it safe by purchasing used items if you absolutely need to make the purchase right now.

Shop at garage sales, check out Craigslist, or scope out the Facebook Marketplace to see if any Facebook friends are selling anything you need. If you can hold off on the purchase for about six months, find a way to save up money for a new purchase instead.

4. Stick with your budget

Get into the habit of reviewing your budget regularly so you aren’t making frivolous purchases. Take a good look at the numbers so you know how much you are able to spend on certain items each week.

Whether you’re buying groceries, gas, new clothes, or eating out, make sure you know what your spending range is for that week so you aren’t over your budget by the end of the month.

You might not be able to cut out or reduce these expenses significantly, but you will be able to set some caps or limits on these expenses to make your budget work.

5. Create a new wants-versus-needs list

You might have had plans to take a long vacation, host a big party, or renovate your home before the economy took a nosedive, but can’t justify making those bigger purchases as money gets tight.

Draft a new “wants” versus “needs” list so you can prioritize your larger expenses and set yourself up to meet your savings goals to cover them. Avoid the temptation to satisfy these “needs” by charging the purchase on a credit card or by taking out a personal loan.

One of the worst money moves you can make during a tough economy is to add to your debt load. Prioritize your expenses now, so you can pay only with cash and identify your actual needs versus wants.

What are some Strategies for Saving Money?

1. Record your expenses

The first step to start saving money is to figure out how much you spend. Keep track of all your expenses—that means every coffee, household item and cash tip.

Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’re accurate—and don’t forget any.

Look for a free spending tracker to help you get started. Choosing a digital program or app can help automate some of this work. 

2. Budget for savings

Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.

Include a savings category—aim to save 10 to 15 percent of your income.

3. Find ways you can cut your spending

If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify nonessentials that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone, too.

Here are some ideas for trimming everyday expenses:

• Use resources such as community event listings to find free or low-cost events to reduce entertainment spending.
• Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
• Commit to eating out only once a month and trying places that fall into the “cheap eats” category.
• Give yourself a “cooling off period”: When tempted by a nonessential purchase, wait a few days. You may be glad you passed—or ready to save up for it.

4. Set savings goals

One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—perhaps you’re getting married, planning a vacation or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it.

Here are some examples of short- and long-term goals:

• Emergency fund (3–9 months
  of living expenses, just in case)
• Vacation
• Down payment for a car
• Down payment on a home or a
  remodeling project
• Your child’s education
• Retirement

If you’re saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or 529 plan.

While investments come with risks and can lose money, they also create the opportunity for growth when the market grows, and could be appropriate if you plan for an event far in advance. See step No. 6 for more details.

Set a small, achievable short-term goal for something fun and big enough that you aren’t likely to have the cash on hand to pay for it, such as a new smartphone or holiday gifts.

Reaching smaller goals—and enjoying the fun reward you’ve saved for—can give you a psychological boost that makes the payoff of saving more immediate and reinforces the habit.

5. Decide on your priorities

After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. Be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs.

Learn how to prioritize your savings goals so you have a clear idea of where to start saving. For example, if you know you’re going to need to replace your car in the near future, you could start putting money away for one now.

6. Pick the right tools

If you’re saving for short-term goals, consider using these FDIC-insured deposit accounts:

• Savings account
• Certificate of deposit (CD), which locks in your money for a fixed period of time at a rate that is typically higher than savings accounts

For long-term goals consider:

• FDIC-insured individual retirement accounts (IRAs), which are tax-efficient savings accounts
• Securities, such as stocks or mutual funds. These investment products are available through investment accounts with a broker-dealer. Remember that securities are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank. They are subject to investment risks, including the possible loss of your principal.

You don’t have to pick just one account. Look carefully at all of your options and consider things like balance minimums, fees and interest rates so you can choose the mix that will help you best save for your goals.

7. Make saving automatic

Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so a portion of every paycheck goes directly into your savings account.

Splitting your direct deposit and setting up automated transfers are simple ways to save money since you don’t have to think about it, and it generally reduces the temptation to spend the money instead.

8. Watch your savings grow

Review your budget and check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly. Understanding how to save money may even inspire you to find more ways to save and hit your goals faster.

What are some Budgeting Strategies?

There are many classic budgeting strategies that offer different approaches beyond what those smartphone budgeting apps do. Here are four popular classic budgeting strategies that still work today.

1. The Zero-Balance or Traditional Budget

This strategy is what many people envision when they think of a budget. It’s simply a list of expense categories, such as “food,” “utilities” and “rent,” alongside a target amount that you’ll be spending in that category.

Ideally, the total of all the expense categories adds up to less than what you’re earning in a given month, giving you some breathing room or ability to save for the future.

This budgeting approach is thorough and gives you a grasp on where every dollar is going. If you set up such a budget properly, you’ll have a great understanding of your usual money habits and can set realistic targets for cutting back in the more flexible areas of your life.

However, it does take a lot of work and attention to get value out of this method, as you get out of it what you put into it.

Many budgeting apps try to offer shortcuts to this method that look good, but they often don’t create a perfect picture of your spending. Investing the time to look at every dollar spent and getting a traditional budget right is worth the time if you’re a detail-oriented person.

2. The Envelope Budget

This is a great simple budgeting strategy for those who are trying to make ends meet. All you do with the envelope strategy is simply cash each paycheck, then sort that cash into a series of paper envelopes for various purposes.

You might have an envelope marked “rent,” another envelope marked “utilities” and a third marked “food.” Then, whenever you need to spend money for a particular purpose, you take money from the appropriate envelope. If there’s not much in that envelope, you have to figure out how to make it work.

This strategy makes budgeting simple and physical because you’re directly handling the money and budgeting it by manually putting it in different envelopes.

It also makes it easy to understand how much money you have to stretch across all of your necessary expenses, so you can immediately sense whether you can afford to spend money on a treat.

It also can help you meet your financial goals, as you can have an envelope for a particular goal or simply leave that money in the bank.

3. The Pay-Yourself-First Budget

This is a strategy in which the first thing you do after collecting a paycheck is to put some of that money aside for long-term goals, then figure out how to live on what’s left.

This strategy is often made automatic when people put money into their 401(k) or other workplace retirement plans.

They’re paying themselves first by having money taken out of their paycheck before they ever receive it, forcing them to live on (and spend) only the remainder of their check. Paying yourself first is a powerful strategy for people who struggle to save for big goals.

4. The 50/30/20 or Rule-of-Thumb Budget

This budget offers some guidance on what to do with your money right off the bat. First popularized in the book “All Your Worth” by Senator Elizabeth Warren and Ameila Warren Tyagi, it suggests that you spend 50% of your income on basic living expenses, 30% of your money on wants (fun things), and 20% of your money on saving for the future.

If you’re able to follow this strategy, you’ll quickly accumulate money in the bank for future goals, but it can be a challenge for many people who are already drowning in bills to cut their basic living expenses down to 50% of their take-home pay.

Read Also: Budgeting on a Fluctuating Income

Following the 50/30/20 budget is great for someone who is first entering the workforce, earning a salary and looking for a model for what to do with that big new paycheck.

Plus, it’s simple: Keep your required bills and basic living expenses below 50% of your paycheck, save 20% of your income for the future and enjoy the other 30%.

These strategies have all been around for years and still work because they address the core issue of budgeting: balancing what you want to do with what you should do.

These classic strategies offer different advantages that work well for different people: the hands-on person who is comfortable with a traditional budget, the tactile person who uses envelopes, the “pay yourself first” person who struggles saving for goals and the “50/30/20” person who’s trying to find a good model to follow.

Conclusion

If you’re accustomed to overspending, getting your budget back on track may sound overwhelming. But these simple first steps will help you make progress toward your goal of spending under what you make. From there, you can begin saving for your future instead of worrying about how to pay the bills.