How to Live Below Your Means: 7 Easy Steps for 2022

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If you want to become and stay wealthy, living on less is the most important thing you can do. Living below your means allows you to save more of your income, invest more, and ultimately build wealth over time. So, I want to share with you how to live below your means by sharing with you seven easy steps. So, let’s dive in and start with some basic questions about living below your means!

Should You Live Below Your Means?

One question that seems to pop up is whether you should live below your means. Candidly, I am not sure why this question comes up so frequently, but it seems to me it’s because most people don’t know what it means to live below your means.

Simply put, living below your means spending less than you make. If you spend more than you make, you’ll set yourself on a path towards debt and won’t be able to save or invest.

Perhaps this question originates because people think living below your means implies that you are cheap and live extremely frugally. For the record, that is not what I am advocating. 

No, living below your means is more about choosing what spending is important to you such that you set yourself up to spend less than what you earn. Living below your means happens when you prioritize your spending and don’t spend more than you make.

So, yes, no matter who you are, you should live below your means.

Benefits of Living Below Your Means

If you’re struggling to convince yourself to live below your means, consider some of the benefits.

First, living below your means will lower your stress level. If you’re currently living paycheck-to-paycheck, you’ll find that if you can reduce your spending such that it is less than your income, you’ll be able to start building a cushion so that you’re not worried about money each month.

Second, when you start living below your means, your credit becomes less critical. Why? Because you won’t need to rely on debt like credit cards to cover your spending.

Third, living below your means will provide you with financial security. You’ll never have to wonder if you can pay the bills in a given month because you’ll be spending less than you earn. And, over time, you’ll be able to put money aside into an emergency fund, investments, etc., so you’ll have a cushion if you fall on hard times.

Finally, living below your means allows you to start building wealth. If your goal is to produce someday enough passive income such that you don’t have to work, building wealth is what you’ll need to do. The bigger the gap between what you spend and what you earn, the more you can put away to build an income.

So, if you’re convinced you need to live below your means and ready to start, here are the seven steps in learning how to live below your means. 

1. Budget Your Money & Track Your Finances

First, you must learn how to budget. Living below your means is a simple formula. Income earned minus money spent should equal a positive number. 

Budget Your Money

There are two numbers you need to track and understand to live below your means:  income earned and money spent. 

You probably have a pretty good idea of how much your take-home pay is, but if you don’t have a budget, it’s tough to understand your spending habits. The thing is, the small purchases add up, and if you don’t holistically monitor your spending, living below your means is much more difficult. But, it is possible to save money on a budget once you learn what you’re doing and start using a budgeting tool.

The budgeting tool I recommend is You Need a Budget. It has worked for me, and I am confident it can work for you.

Track Your Finances

I also recommend keeping tabs of your broader financial picture, including investments, savings, etc. The reason is tracking your finances will give you the motivation to keep doing what you’re doing. Seeing progress is a huge motivator. 

The best financial tracking software I’ve found is Personal Capital. And the best part of all, it’s free! 

Personal Capital

Personal Capital is a comprehensive suite of financial tools that helps you track your net worth, make sure you stay on track for retirement, and much more! The best part about Personal Capital is it offers a FREE way to track your investment and cash accounts and plan your financial future! Check out this review to learn more!

2. Force Yourself to Save

Next, if you want to live below your means, you need to force yourself to save a chunk of your income. My theory is this:  what you do not see, you do not spend. 

That’s why I recommend automating your finances to move money to your savings or investments before you ever see it. My favorite way of doing this is to set up a 401(k) contribution so that you never even see the money in your paycheck.

While a good target is 20% of your income, this is a target to build up to, as I realize it’s a significant number. 

3. Lower Your Biggest Expense

When you are trying to live below your means, the small stuff adds up, and you should think about whether it aligns with your priorities. But I also want you to think about whether you can go after a big win.

For the vast majority of people, housing is their most significant expense. Would you consider moving to lower your housing expenses? If you live in an apartment, would you consider moving somewhere where you cut $100 to $200 per month from your rent? If you live in a house, could you move somewhere that reduces your mortgage payment by $400 or $500 per month?

I realize this isn’t always possible, but if you’re willing to consider lowering this expense, you’ll make a massive stride towards living within your means. 

4. Reduce Spending that Doesn’t Align to Your Priorities

Next, as I alluded to earlier, you’ll want to think about whether your spending aligns with your priorities. I recommend working through this as part of your budgeting process.

Think about the little things on which you spend money. Are all of these things important to you, or would you rather be putting that money towards your long-term financial goals?

Think about things like clothing, memberships/subscriptions, food, and drink expenses. Figure out the things that are important to you, and if they are, figure out how to make them work within your budget. 

5. Lower Spending on Regular Expenses

My next tip is, by far, my favorite for living below your means. What if there is a way you can save money on your regular expenses like cable, cell phone, etc.?

I recently discovered a service that can help you do exactly that. Truebill will negotiate your bills with providers and help save you money. If they save you money, they keep a slice of the savings. It is that simple. I saved $885 in a matter of weeks, and that’s why I think this is a service you have to try!


Truebill is a bill negotiation service that will help negotiate your regular bills, track your subscriptions, and help you save. You only pay when Truebill saves you money, so you have nothing to lose. Check out our review to learn more!

6. Save for Purchases Instead of Buying on Credit

Next, living below your means implies that you pay for things with cash. While this isn’t possible with every purchase (namely houses and cars), most everything else should be paid for with cash.

The reason is that when you live below your means, you shouldn’t be creating any new debt.  

Now, for clarity, this doesn’t mean you shouldn’t use credit cards. Using credit cards is one of my favorite personal finance tips if used correctly. What I mean, instead, is that you only put purchases on credit cards, which you can pay off in full every month.

7. Increase Your Income

My final tip is not about expenses but rather about your income. Again, living below your means is merely creating a gap between your income and expenses. You can increase the size of this gap by lowering expenses or increasing your income.

While lowering your expenses is often easier than increasing your income, there are lots of ways you can earn some extra cash. Check out my list of passive income ideas or this impressive list of side hustles to find some ideas to get started. 

How to Live Below Your Means:  7 Easy Steps

Living below your means doesn’t have to be super tricky. It just requires spending less than you earn. To recap, here are seven easy steps to live below your means:

1. Budget Your Money & Track Your Finances

2. Force Yourself to Save

3. Lower Your Biggest Expense

4. Reduce Spending that Doesn’t Align to Your Priorities

5. Lower Spending on Regular Expenses

6. Save for Purchases instead of Buying on Credit

7. Increase Your Income

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