I’m frugal and proud! I love telling people how to live below your means because it’s both beneficial for the planet and for your wallet. Living sustainably and building my financial health are two of my most important values.
By living frugally I have been able to save between 35-72% of my income over the years. It’s helping me reach financial independence and it can help you too! So let’s get to the tips.
1. Try Living on One Income
If you are a two-income household, try living on only one person’s income for a period of time. It doesn’t have to be forever!
Living on one person’s income for six months can help you pay off debt, or build up your emergency fund. Being able to live off one income takes work and is a privilege, but it will absolutely turbocharge your financial goals. You need a strong budget, a timeline, and good communication between yourself and your partner. Both of you need to be on the same page and working towards the same goals, otherwise it won’t work.
2. Create a Budget You Can Stick With
I love values-based budgeting. It allows me to budget my money in a way that lets me enjoy my present while saving aggressively for my future.
Values-based budgeting is creating a budget where you spend on your needs and your TRUE desires. It’s an approach to money that eliminates anxiety spending, aspirational spending, and non-value aligned spending.
For me, that means I don’t spend money on things like getting my nails done or red meat, because they don’t align with my values. Then I take the money I’m saving and put it towards expenses and goals I actually care about, like travel or financial independence.
Have you ever spent money simply because you were bored, or in an attempt to compete with someone, and then regretted the purchase? Values-based spending seeks to totally eliminate these kinds of purchases so you save more money. You can get our values-based workbook and budget right here, which walks you through how to identify your personal financial values, how to identify when you’re spending emotionally, and even helps you figure out side hustles to make more money!
You can budget with a free app, like Empower, or a notebook, a paid app like YNAB, or a spreadsheet. Whatever method is right for you is the best method! Don’t worry if you have to try a few to see which one works best for your lifestyle.
3. Keep Major Purchases on Budget
We all make major purchases like cars, houses, or home improvements. Some lifestyle choices like having kids can also come with high costs. (Did you know the average birth cost in the US is $18,865?)
When it comes to these high-cost items we want to stay within a budget that makes sense for our income. We can’t live below our means with a Lambo that puts us $300,000 in debt, you know?
Make these purchases based on what you can COMFORTABLY afford. A bank might say that you can buy a $700,000 house and can afford a $4,000 a-month mortgage. But do you want to spend that much of your income on your housing? You don’t have to spend that much; spending $200,000 less on the house can bring your mortgage down to $2,500, a much more reasonable number.
This is why budgeting is so important. And it’s honestly why I personally like to use an app or a spreadsheet to do my budgeting. I can see the data laid out before me.
Here’s a shot of my Empower dashboard, with personal info removed. You can see it shows you all your bank accounts on the right, your net worth on the top left, and information about your budgeting and cash flow.
Budgeting shows us the truth of our income and what it can support. Before making a big purchase refer back to your budget to see what you can truly afford.
4. Pay Cash When You Can
The best tip I have for how to live below your means is to avoid debt. Debt may be necessary for things like college or a house but try to avoid going into debt to pay for everyday expenses like clothing or food.
Paying cash for things like used cars or vacations can save you huge amounts of money and help you avoid debt. A one-time cash payment also means you don’t have to add a line to your budget to accommodate a new monthly bill. It’s already paid for baby!
Cash payments might also net you a discount! Many health insurance providers will give you a discount on payments if you can pay the total in cash in one payment. You might also find debt collectors will cut you a deal for a one-time payment to close out the debt.
5. Borrow Instead of Buying
Overall, we as a species are making way too much stuff. In the US, we throw out 34 BILLION pounds of used clothing and textiles a year. And it’s bad for our planet and our wallets! All that fast fashion we’re producing, for example, means we’re using raw materials like cotton and water to create it, just for it to end up in a landfill a couple of months later.
Borrowing items is 100% free! And using what already exists is better for the planet- no new materials required!
You can borrow a dress for your friend’s wedding, instead of buying one. You can borrow a drill from a neighbor instead of buying one. The next time you find yourself needing something you don’t already own, test 3 people in your life to see if you can borrow it.
This is me and my partner at a wedding and I am stylin’ in a borrowed dress!
6. Trade Or Swap For Items
Similarly, you can trade or swap items you already have for ones you need. Online communities like Buy Nothing or Freecycle make this very easy to do!
Trading or swapping is not only free but a great way to get items that you don’t actually use or want out of your house. Lots of us have stuff in our homes that we don’t use and it ends up being clutter. Turn that into stuff you will use by swapping or trading it!
I like to host book swaps in my community, which helps me constantly get new reading material without needing to pay for it!
7. Have a Robust Emergency Fund
Emergency funds are money you keep in a high-yield savings account for when an emergency happens. Maybe you have a flat tire and need a tow, or maybe you have to take a last-minute flight home. That’s when you dip into your emergency fund.
Living below your means will be easier when you have a strong emergency fund. It gives you peace of mind and acts as a financial lever you can pull if you need it.
Start with four months of your bare minimum living expenses and build to eight months. You can keep up to one year of living expenses in an emergency fund.
8. Avoid Lifestyle Creep
Lifestyle creep is when you inflate your spending as you earn more money. While we love to see you earn more (and here’s a roadmap to earning six figures for you) we don’t want to increase our spending as we increase our income. That kind of renders the higher income moot, doesn’t it?
Avoid lifestyle inflation by having clarity on your financial goals and a timeline to reach them. Try to avoid feelings of competition with your co-workers or peers; just because they got a new car doesn’t mean you need to replace your paid-off car that runs great.
Lifestyle inflation can be kept at bay by finding peace and pride in how you live your own life. Focus on living the life that is meaningful to you and don’t worry about what others do.
9. Use Credit Card Rewards to Pay For Things
Many credit cards come with rewards programs that can help pay for travel, car rentals, or even gift cards. Knowing how credit cards work is a powerful tool that can help you learn how to live below your means while still enjoying the perks of life.
Credit card rewards can be used through the card company’s portals to get discounts on flights (potentially making that vacation free!) Often you can choose the category you want to earn points in. For example, you can get a cashback credit card that offers you more points on buying gas than it does on buying clothes, which is perfect for anyone with a long commute.
10. Become a One Car Household
One less car on the road means less traffic and fewer emissions, which is a win for all of us! I’ve been a one-car household with my partner for the last three years and it has saved us thousands of dollars in that time.
Choose cost-effective transportation options, such as carpooling, public transportation, or biking. My partner bikes to work every day!
Keep your running vehicle well-maintained to avoid unexpected repair costs. Cars really make the old adage “you get out what you put in” true! It’s worth it to pay for an oil change every six months instead of risking damage to your engine and needing to buy a whole new car.
11. Shop The Sales & Use Apps to Save More
Everything has an app now and when it comes to feeding yourself they can save you lots of money!
Check to see if your local grocery store has its own app where it offers exclusive sales or discounts. You can also use an app like Fetch, which allows you to scan your receipts and earn rewards.
Buying generic and comparison shopping are tried and true ways to keep the costs down on food, prescriptions, and clothes.
12. Invest to Create a New Income Stream
Many people think of investing as building money for you in retirement only. That is an important part of investing, but it doesn’t define the whole investing world!
You can use something like a brokerage account, which is a non-retirement investing account, and invest in sustainable index funds, to create a second income stream. Investments earn money through compound interest, which is essentially your money earning more money.
This interest is what people who reach FIRE often live off of, and it’s a powerful second stream of income once your investments grow enough. That’s why us money nerds talk about getting started investing as soon as possible! The sooner you start investing, the more time your money has to grow, and the more interest you are likely to earn off your investments.
We teach you exactly how the stock market works and how to open your own Individual Retirement Account in our Investing 101 workshop, HOW TO NOT DIE BROKE.
I started investing at age 27, and now in my mid-30s, I am really seeing the fruits of that labor come to life!
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