How to Live Below Your Means

Categories: Money | Personal Finance

  • How To Live Below Your Means

    It is not difficult to understand how to live below your means. It just takes commitment to a few good habits described in this page. Below are tips to lead the way. If you are already in debt, then it could take a few years to get comfortable living below your means, but it can be done. On this page are links to the stories of many who have done it!

    October 19, 2009 Eighty-five percent of people aged 18 to 29 figure they will need a million dollars in savings and investments in order to retire. This is the finding of a poll done by the Northwestern Mutual Foundation's website about financial literacy. http://www.reuters.com/article/pressRelease/idUS122609+19-Oct-2009+PRN20091019

  • Tips

    • A Want Is Not A Need
    • Food Prepared At Home Tastes Perfect
    • No One Who Is In Debt Can Afford A Car Payment
    • Have A Savings Account Just For Your Next Car
    • A Car Mug Keeps Home Brewed Coffee Hot
    • Get A Receipt Every Time You Spend Any Money
    • Use Rags and Cloth Towels Instead of Paper Towels
    • High School Plays and Games Are Fun Bargain Entertainment
    • Wear Sweaters and Turn the Heat Down 5 Degrees
    • Get Wet, Open Windows And Turn The Air Conditioner Off
    • Freeze Your Credit Cards In Tupperware Full of Water
    • Shop the Perimeter of The Grocery Store
    • Keep a Price Book of The Lowest Grocery Sale Prices
    • Stock Up When Groceries Are At Their Lowest Sale Price
    • Break Up Costco Bulk into Smaller Freezable Portions
    • Most US Tap Water Is Perfectly Safe
    • Do Your Own Housework and Yard Work and Cancel Your Gym Membership
    • Thrift Stores Have Nearly New Clothes
    • Thrift Stores Have New Items Perfect for Gifts
    • Garage Sales Have Nearly New Toys
    • Wash Used Toys in The Dishwasher

  • Introduction

    The reason you want to know how to live below your means is so you can save, invest and get ahead. Begin by keeping track of your money. Write down every dollar that you spend, and every dollar that you earn. Do this for a month so that you have a good picture of your total income and total expenses. This is a good habit that many Americans don't have. Living below your means is not difficult; it just requires commitment. For a very complete understanding of this process, read The Total Money Makeover by Dave Ramsey.

  • PYF Challenge FNBO "Pay Yourself First" by PT Money

    This home made rap video tells it like it is, and is danceable to boot! This is the testimony of someone who saved up and bought a car and a house. He says he did it by eating rice and beans, and cutting his cable bill. He now has a baby on the way, and feels the need to save more.

  • Step 1: Pay Yourself First

    Eighty-five percent of people aged 18 to 29 figure they will need a million dollars in savings and investments in order to retire.http://www.reuters.com/article/pressRelease/idUS122609+19-Oct-2009+PRN20091019 No one is going to give you this million dollars. You have to save and invest for it. The reason you want to know how to live below your means, is so you can save, invest and get ahead. You save by paying your savings and investment accounts first, before you go shopping or pay rent. Shoot for saving twenty percent of all your income. If that is not possible right now, then make it five percent or two percent, but start saving.

  • Step 2: Track Your Income and Expenses

    Write down all the money that comes in, and all the money that you pay out. Include your wages, tips, rents, royalties, child support -- it may help to look over last year's income taxes. Figure out what your expenses are. Include tithe, rent or house payment, utilities, food, car payment, gas, insurance, maintenance, credit card bills, loan payments -- it may help to look over your check book or online bank records. Don't forget to include what you spend shopping, going out, eating fast food, and buying coffee at Starbucks. Get receipts and transfer the amounts to your income and expenses list. It is easiest to figure income and expenses on a monthly basis, but don't forget bills that come once or twice a year like insurance and taxes. Once you have done this for a month, you are ready for step 3.

  • Step 3: Adjust so Expenses Are Less than Income

    List all of last month's expenses in order: most essential to non-essential. Keep a running total. Decide how much you are going to pay yourself first, and draw a line accordingly. Now, you have a choice: 1) cancel all spending below the line 2) increase your income 3) a combination of 1) and 2). Examples of non-essential spending: car payment (Sell it. Take the bus or pay cash for a clunker.), cable TV, high speed Internet, eating out or getting fast food. Ways to increase income: night job, sell things you don't need on E-bay, do tasks or answer questions for Mahalo. This adjusted list so expenses are less than income is called a budget.

  • Step 4: Avoid New Debt

    Save up an emergency fund so that you don't need to use a credit card if your car breaks down or you have some other unforeseen expense. Living below your means is paying out less than you take in. This means paying cash. Don't buy on credit. Don't buy with credit cards. Don't take out a loan to buy a car. If you don't have the cash for something, then save until you do. Avoid getting into debt. This means avoid paying only a little each month and owing the rest in future months.

    Debt has no part in how to live below your means. The only exception is a house payment. In this day and age, it is nearly impossible to pay cash for a house. Do not ever borrow on your house to pay off other debts. This is called a home equity line of credit, or HELOC. It will keep you in debt for the rest of your life. It is totally possible to pay cash for cars and everything else besides houses. If you don't have the cash, then you don't buy it, at least not right now.

  • Step 5: Pay Off Old Debt

    If you already owe a balance on credit cards, car loans, student loans, or other non-mortgage debt, then get it paid off before you do any non-essential spending. In his book The Total Money Makeover, Dave Ramsey says it is psychologically easiest to pay off one debt at a time. He recommends paying off the smallest debt first. There are good arguments for paying off the debt with the highest interest rate first. Make a plan that works for you, and stick to it. Do not consolidate your debt unless and until you have committed to keeping your expenses less than your income. If you consolidate and continue to overspend, then you will make your debt bigger instead of smaller. That is not how to live below your means!

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