Do you dream of retiring, getting out of debt, building wealth, or just living a life that doesn’t rely on your next paycheck? Well, no matter what goals you have for your financial future, they require one common thing: living below your means.
But, what does it mean to live below your means?
Put simply, living below your means is the act of spending less money than you earn. For example, if you earn $3,000 per month, but only spend $2,500, then you are living $500 below your means. This is an important financial habit, because it allows you to save, invest, and build wealth.
But, let’s be honest, that’s easier said than done.
Living below your means requires you to trade immediate pleasure for the sake of long-term gain. It means placing a higher priority on saving than you do on spending. And, above all, it takes self-discipline and sacrifice.
That said, what if it isn’t as tough as everyone makes it out to be?
What if, instead of focusing about all the sacrifices of living below your means, we focused on all the benefits? Because, seriously, there are tons of them.
Well, that’s exactly what we’re going to do!
In fact, here are 9 benefits of living below your means.
1. Living Debt Free
For a long time, I thought living below my means just meant my monthly payments had to be less than my monthly income. The problem with this way of thinking, was that it allowed me to take on debt that I couldn’t actually afford.
What living below your means, actually means, is only buying things you can pay for in full. That means no credit card debt and no loans. Just cold hard cash.
Now, when you first read that, you might think it sounds boring, and a little bit insane. But I can honestly tell you that it is wonderful to get a paycheck and not have to subtract monthly payments from it.
It is exciting when you hop in a car that you own outright.
It is glorious watching your bank account grow instead of shrink.
And it is thrilling to know that as long as you live below your means, you will never have to pay off debt again. Ever.
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2. Less Stress and Anxiety
Have you ever felt ‘buyer’s remorse’? Well, when you live below your means, you almost never experience it.
You see, when you live below your means, every dollar has a purpose, and every purchase requires thought and intentionality. When you know how much money is coming in each month, you have to be disciplined with your spending to operate within that amount. And with that discipline, comes a surprise reduction in stress.
You won’t lay awake at night wondering where your money went this month. You won’t be stressing over the length of time between now and when you get paid. And monthly living expenses like water, heat, and electricity won’t even come close to making you sweat.
3. Your Credit Score Matters Less
It seems like everywhere you turn these days, the most prominent piece of “financial advice” people want to give you is to build your credit score. But you know what happens when you live below your means, stop taking on debt, and get control of your spending? Your credit score carries less and less weight. Why? Because you don’t need a credit score to buy something you can actually afford.
If you want to get a new car and you can afford to buy it outright, just pay cash. If you want to remodel your kitchen and you have the money, you don’t need to talk to a bank, you just need to pay for a new kitchen… no credit score needed.
Living below your means, saving, and paying cash for the things you want, takes the power out of the almighty credit score, and puts it in your hands. That’s the way it should be.
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4. The Ability To Build Wealth
Have you ever thought to yourself, “I wish I had more money”? Well, living below your means is the best way to accomplish that.
It might seem a little obvious, but when you don’t spend every dollar you make, all the money you don’t spend, starts to add up. Then, before you know it, instead of wishing you had more money, you will be wondering where to invest all the money you do have.
In order to be wealthy, you need to have money to invest and grow. And in order to have money, you need to spend less than you make. It’s a pretty simple concept, and one of the biggest benefits of living below your means.
5. More Financial Confidence
Before I took control of my spending habits and started living below my means, I definitely lacked financial confidence. I mean, my bank account didn’t have any commas in it. I was terrible with money!
Now, after a lot of experience living below my means, I have a ton of confidence in things like budgeting, saving, investing, handling my taxes and just general financial decision-making. I’ve gotten good at saying the word ‘no’. I don’t let people that are secretly buried in debt tell me how to run my finances. I do my own research, and only make decisions that I am confident will benefit the financial future of my family.
After you start to reap the rewards of living below your means, you will be surprised how confident you will become in managing your personal finances. Who knew that frugal living could lead to such self-assurance.
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6. More Freedom
One of the best parts of living below your means is the freedom it provides. When you aren’t saddled with crippling amounts of debt, and terrible spending habits, you can plan vacations, pursue your passions, or quit that job you hate so much. Let me elaborate.
Spending more than you make has a way of shackling you to the life you are currently living. For example, how many people have you met throughout life that are stuck in a job they hate, because they have too many monthly expenses to get by while they pursue a better career? How many families never go on a vacation because they bought a house they couldn’t actually afford? And how many people sacrifice their retirement for the sake of a new car that costs $500 per month.
Living below your means breaks the bonds of overspending, and allows you the freedom to pursue the life of passion and purpose you have always imagined for yourself.
7. A Healthier Lifestyle
When you start living below your means, you have to be intentional with things like food and recreation. And this almost always leads to a healthier lifestyle.
You will find yourself cooking more healthy meals in place of going out to eat. Or, you might find yourself lifting weights after work instead of grabbing drinks with co-workers, because you want to make the most out of the money you spend on your gym membership each month.
It’s hard to be frugal and disciplined with your finances without improving other areas of your life. Chalk that up as a benefit of living below your means.
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8. Financial Security
When you learn to live on less than you make, two really cool things happen. First of all, and most obvious, you don’t require as much money to live. Your habit of overspending disappears, your expenses dwindle, and your financial life becomes more and more simple.
Second of all, as your expenses lower, your ability to save money grows, and transforms into a big, beautiful pile of cash.
The two things compliment each other. Your lower expenses cause your savings to grow, and the success you see in your savings, causes you to want to cut more expenses. It’s a wonderful cycle that results in a massive amount of financial security, and sets you up to handle emergencies like the loss of your job, or a surprise medical expense.
Additionally, big expenses like, weddings, cars, a new home, and college become much less overwhelming.
Financial security is a wonderful thing, and living below your means is the first step to achieving it.
There was a time in my life, when spending money was the only financial skill in my repertoire. Honestly, the only reason I ever saved money, was so I could spend it on something I wanted. But there was always ‘one more thing’. The more money I spent, the more I wanted to spend. I was living beyond my means, my financial situation was lackluster, and I was never content. It was a vicious, unsatisfying cycle.
It may seem a little counterintuitive, but living below your means, spending less and placing an emphasis on your financial well-being, actually leads to financial contentment.
Just like any addiction, there’s no amount of stuff that can satisfy an addiction to spending money. You can’t buy your way to contentment. But if you stop trying to keep up with the Jones’, focus on financial simplicity, and learn to live below your means, you will realize how wonderful and meaningful your life actually is.
Final Thoughts On Living Below Your Means
When you really examine the realities of living below your means, you will be amazed at the benefits it provides. Whether you want more financial freedom, contentment, confidence, security, or just an overall healthier lifestyle, you should try it out. I promise, it isn’t as boring and difficult as it might seem.