7 Tips to Live Below Your Means | Capital One (2024)

In simple terms, to live below or within your means is to spend less money than you make each month. Sticking to this personal finance concept can help you manage your expenses and improve your financial well-being.

Learn more about how some simple steps can help you live below your means and guide your money management techniques.

Key takeaways

• Living below your means can help you improve your financial health and prioritize goals like saving and investing.
• You can take steps to live below your means, like budgeting and finding ways to reduce spending.
• Finding ways to pay down debt can help you save on interest charges so you can keep more money in your wallet.
• Evaluating your current financial habits and being conscious of any changes to your budget can help you stay on track.

Like anything, learning to live below your means can take time and practice. But if you’re consistently spending less than you earn, you could boost your financial health.

These seven tips may be able to help.

Not sure how to start spending less? First, take some time to understand your financial habits.

You can use statements from your bank, debit card or credit card to find patterns in your spending. For example, you may notice that you order a lot of takeout. Being aware of your existing habits can help you build better ones, like setting aside time to meal plan or buy groceries each week.

Once you understand how much you earn and spend, a budget can help provide greater control over your finances.

Budgeting doesn’t have to be a daunting task. Here are some tips for building a budget:

• Determine your income. Income sources can vary. Be sure to consider all potential sources, including a paycheck from a full-time job, earnings from a small business or side hustle, alimony or child support payments, and passive income.
• Identify your monthly expenses. Use receipts or statements to track your monthly expenses. It might help to identify fixed and variable expenses to show which expenses are mostly constant and which can change from month to month. This could help you see where your money is going and figure out areas where you may be able to cut back.
• Choose a budgeting style that works for you. Once you’ve determined how much you make and how much you spend, it might help to find a budgeting style that works for you. Some common options include the 50-30-20 approach, zero-based budgeting or the envelope method. The Consumer Financial Protection Bureau (CFPB) also offers a free budgeting worksheet that might help you track and manage your spending.

Once you have a budget, you can find ways to reduce expenses and build savings. The CFPB recommends setting a weekly spending limit, which can help eliminate small purchases that add up throughout the month.

Some other ways to reduce spending include paying off credit card statement balances each month to avoid interest and keeping an eye on recurring charges like subscriptions or memberships. If you’re not using them, consider canceling to save money.

Take some time to identify your financial goals, and let them serve as motivation to stay on top of your spending.

You could start with a long-term goal, like starting a business, buying a house or retiring early. And then use short-term goals as a way to work toward it. Some common short-term goals might include saving a certain amount of money over the next six months or paying off a debt by the end of the year.

No matter what you hope to achieve, thinking about your long-term goals and how your finances play a part in them is an important step in building your financial well-being.

Paying down debt on time each month can help you avoid spending more than you need to on things like interest and late fees. This helps you keep more money in your pocket that you can save or use to pay off other bills.

It can be a balancing act to save money while paying off debt, but an effective budget and some financial planning can help you stay on track.

If you pay off a debt or increase your income, you may be tempted to spend the extra money on things you don’t exactly need. This is called lifestyle inflation or lifestyle creep, and it can make it more difficult to reach your financial goals.

Budgets are meant to be flexible. So if you find yourself with extra cash, don’t be afraid to revisit yours and make changes. If you’re thinking of splurging in celebration, consider making adjustments elsewhere. And think about how major purchases or new debt might affect your long-term finances.

To live within or below your means is achievable. By examining your spending habits, creating a proper budget and planning for the future, you might take better control of your finances and work toward a state of financial well-being.

Ready to build more healthy financial habits? Learn more money management tips to establish a solid financial foundation.