Living below one’s means is a fantastic way to start working towards true financial freedom. It’s not just about cutting back on costs, and it shouldn’t entail giving up everything enjoyable in life. Rather, it’s about taking control of money to make it easier to save for retirement, fund future plans, and deal with emergencies.
How to Get Started
For those who have been living paycheck to paycheck for years, finding ways to cut back on costs and live below their means can be a challenge. Searching for a Financial Advisor Near Me and making an appointment to discuss budgeting is always a good idea, but living a more frugal lifestyle requires an ongoing commitment to budgeting and saving.
The first step is to create a plan that accounts for both income and expenses. Most experts recommend following the 50/30/20 budget plan, which divides money into wants, needs, and savings or debt repayment. Of course, everyone has to tailor this basic budgetary plan to his or her own needs, and those who want to maximize savings while simultaneously paying off debt may have to devote a greater percentage of their income to the latter category.
Cut Unnecessary Expenses
The easiest way to start saving more money is to divert a certain percentage of each paycheck to a dedicated retirement or savings account. Figure out how much money will be required to meet long-term financial goals, then set up automatic transfers for the day each paycheck gets deposited. If that money is unavailable from the very beginning, it’s easier to figure out how to cut expenses to live below one’s means.
One easy way to put aside some extra money each month is to redirect monthly payments that are no longer relevant towards a savings account. Think student debts, car loans, or smartphone payments. Once the debt is paid off, instead of adding the money back into the family’s monthly expense pool, stash it away and let it accumulate.
When it comes to figuring out how to cut daily or monthly expenses, things can get a little more challenging. Start with the meaningless expenses like subscriptions or memberships that have gone unused for months, frequent meals eaten out on ordinary weekdays, and leases for needlessly expensive cars. It can take some time to figure out how to shuffle things around to minimize debt and maximize savings, but most people find that cutting back on a few luxuries is well worth it when they start seeing genuine progress towards their long-term financial goals.
Consider Downsizing
It may be tempting to buy the biggest house or the most expensive car that fits the family’s budget, but that’s not a good idea for those who want to prioritize long-term savings. Downsizing cars, homes, and other major purchases can cut back on taxes, insurance, and maintenance costs without having a meaningful impact on the family’s quality of life.
Living Below One’s Means Is Worth the Sacrifice
It may take some time to get used to cooking most meals at home, driving a used car instead of leasing a new one, or living in a slightly smaller space. However, all of those minor sacrifices will pay off in the long run as families and individuals get their financial lives on track and start seeing their savings accumulate.
