How to Live Within your Means: More Money than Month

On the journey to get out of debt you must make a mandatory mental change about how money works. Or rather how to make money work for you! To be financially free approach your finances differently than you did when you got yourself into debt. Don’t just spend because you have a high credit limit. Or because you want something. Or even because this totally awesome item is on sale and you’ll be able to cover it next week when you get paid. You have to have money to spend money if you want to be financially free. Here is how you can learn to live within your means.

What Does “Living Within Your Means” Even Mean?

First of all, what does it even mean to “Live Within your means”? It means to not spend more money than you are receiving. If you make $4000 per month then you are allowed to spend only $4000. You are not allowed to spend $4001. Because you do not have that extra $1 to spend.

To be financially free you cannot spend more than you make.

Budget to Live Within Your Means

Here comes the nasty B word again. However, budgeting is 100% essential if you want to live within your means. Here are a few tips on budgeting:

• DON’T let expenses surprise you which cause you to overspend
• DON’T under-plan your finances, make sure you are setting realistic expectations and budgeting enough for food and other essentials
• DO write out your budget and keep it with you
• DO use the envelope approach
• DO make your budget monthly not when you get paid (know where your money is going before it gets to you so you’re not tempted to “budget” something in that will later cause you to overspend)

Categorize your budget into the following (or similar) spending areas:

• Charity
• Savings
• Housing
• Utilities
• Food
• Clothing
• Transportation
• Medical
• Insurance
• Personal
• Recreation
• Debt

Each of these categories have subcategories that you can break down into even smaller or more detailed budgeting. Everyone’s needs are different and there are an innumerable amount of combinations that we could discuss, but these are some generic categories to consider when making your budget to live within your means.

Make a Plan to Live Within Your Means

Generally you know how much money you make each month unless you are on commission that changes drastically. So there should be no surprises about how much money you get to spend. In order to live within your means you need to make a plan and stick to it! Here’s how you can make a plan:

1. When creating your budget know which paycheck each item is coming from. Know which dates your bills come out on (this usually doesn’t change. The only aspect that might change is which bills are due if you have bi-monthly, quarterly, or yearly bills).
2. Give yourself some of your “fun money” each paycheck. Just because your first paycheck will cover all of your bills doesn’t mean you should pay all of your bills up front. This is unrealistic and is not sustainable over a long period of time. When you pay all your bills up front you will then fill like you are broke and you will not stick with your budget.  If you want to live within your means and not be tempted to overspend give yourself some allowance with each paycheck.
3. If you find you have too many bills due in one section of your month, try to work with the creditors/companies to change dates that better work for you.  You can always cancel service on something if they won’t budge!  (And that saves you money in the long run!)
4. If you have extra money leftover after all the essentials (and are not in debt) figure out what you can do with your leftover. Invest? This can help you grow wealth. Savings? An emergency fund is a critical component of any budget. Mortgage? End the biggest bill each month earlier than usual by paying off your mortgage early. If you are still in debt perhaps you could do the debt snowball and start paying off your debt!

Be Accountable

My best motivator is having someone that I am accountable to. When I know I have to “report my progress” I will try harder than if I’m just holding myself to a plan. Find an accountability partner. This could be your spouse that’s better at finances than you, this could be a family member, a coworker or friend you’re comfortable enough to discuss your finances with. The goal is to find someone you can report to. Have the hotline for when you really feel like going out shopping!

Discipline

While it’s important to have someone to be accountable to, you also have to have some discipline if you really want to live within your means. This can be the hardest area for most people. We are in debt for a reason, right? Once you realize, however, how nice it is to be financially free you will understand why it was so important to be disciplined and how important it is to remain disciplined over time. Just because you get that bonus does not mean you get to drop all you’ve been working towards. Now, I fully encourage you to reward yourself for doing well, however, that needs to be budgeted in!

Make Sacrifices to Live Within Your Means

After self-discipline the thought of making sacrifices is probably the next hardest step. Saying no is hard.  Saying no when you make good money but are in so much debt you literally can’t afford anything else is hard.  My in-laws like to go on cruise ship vacations and we were always invited to go but we had to say no. A lot. I didn’t want my in-laws to think we were poor, but I also knew it was better for us to pay off our debt and become financially free so we turned down a lot of trips to the Caribbean. Sometimes sacrifices are an every day event like taking your own lunch to work instead of eating out. Ending subscriptions for things like cable, magazines, or club memberships. Downgrading things like internet or phone services. Carpooling. Cutting out junk food purchases.

The list could go on and on. Be creative with the sacrifices you make and switch them around every now and again so you can feel like you reward yourself. Instead of eating out every day, maybe you can eat out twice a month every other month. If you budget for it, you can do what you want and still live within your means.  But sacrifices will help you live within your means.

Don’t Count on a Bailout

I have heard countless people say “Well, I get paid next week so I’ll buy this now.” That is the worst mentality when it comes to money. As mentioned above you need to plan. Don’t count on your next paycheck to be how you pay for something. Follow your plan. That game will be on sale another time. Those clothes will come around again. That perfect gift will have to wait.

If you are relying on money you don’t have yet then how are you ever going to be caught up? You will always be behind. If you are not disciplined enough to wait to purchase something cut up those credit cards and buy with cash only. You will know exactly how much you have available to spend and that will help you live within your means.

Recognizing Wants vs. Needs

Do you NEED that new book (or shoes, or ice cream, or video game) or do you simply WANT it? How can you recognize what you want vs what you actually need. We don’t really NEED that much when it comes to survival. We NEED food. We NEED water. We NEED shelter. I WANT that food to be Mexican. You WANT that water to taste better which only comes in the form of soda pop. We WANT that shelter to be a huge house or an expensive car. I’m not saying you have to give up everything in order to live within your means, however, I do believe you need to understand what words you are using to justify spending your money.

Whether you are in debt or not it is still important to live within your means. If you are in debt, the money you have is not actually yours.  If you are out of debt then the money belongs to you.  Once the money is actually yours you can spend it how you want. My personal goal is to make my money make more money for me. I want to grow my wealth so I am making it my personal goal to live well within my means so I can put my extra cash to work earning me even more cash. I want to be considered a millionaire when I grow up.

What about you? What helps you live within your means each month?