Living within your means: An easy-to-follow guide

Have you incurred some debt? Do you feel like it’s a stretch to pay your monthly bills? Counting your dollars in the grocery store aisle to make sure you can afford healthy food this week? You’re not alone. Many people struggle to cover all their expenses and live within their means.

Living within your means is a strategy for ensuring that you’re not overspending or neglecting your financial goals. While it may take some changes to your financial habits, it is possible to live a comfortable lifestyle without the need to spend, spend, spend. 

Keep reading our guide to living within your means for some practical tips on how to get started today. 

What does it mean to live within one’s means?

Living within your means means that you save and spend less than or equal to your income. Rather than taking on debt or overspending your way into a paycheck-to-paycheck lifestyle, you can budget what you do have or change your money habits to make what you have work.

Some benefits of living within your means include:

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• Being prepared for emergencies and large purchases

• Less stress about money

• Spending less money on things that don’t align with your values 

• Creating long-term financial security 

Warning signs that you're living beyond your means

There can be a variety of warning signs that you are not living within your means. Here are a few of the most common:

• You have minimal or no savings with no emergency fund to keep you secure.

• You have a low credit score with high credit card balances or other types of debt.

• You spend all of your paycheck before getting your next.

• You don’t have a budget or are consistently exceeding it.

• You only make the minimum debt payments (or may even struggle to do that).

• You stress about your bills and monthly expenses. 

Fortunately, it’s not impossible to recover! Let’s take a look at some ways you can begin to improve your financial situation and live within your means. 

Practical tips for living within your means

You can implement these tips day-to-day to keep your spending in control and make the most of your money.

Create a detailed budget

If you haven’t done so already, create a budget now to help you get on track. Working within a budget helps you analyze your spending and become more intentional about where you’re putting your money. Methods such as zero-based budgeting ensure that every penny of your monthly income is accounted for while also making sure that your bills, savings, and debt are all covered. Learn more about the principles of budgeting to use your money efficiently and effectively. 

Prioritize needs over wants

The 50/30/20 rule outlines a basic budgeting method, where you allocate 50% of your income to necessary living expenses, 30% to your wants, and 20% to savings. This can be a good starting point if you’re trying to be more mindful of prioritizing your needs. However, if you struggle to pay all of your bills with only 50% of your income, you may need to adjust the percentages to still prioritize your needs further until you can find a way to increase your income. 

Save before you spend

Saving before you spend ensures that you’re working toward long-term goals that can protect you in the future. Your monthly budget should always contain some sort of savings goal. Move that money into a savings account to use for emergencies, retirement, or large expenses. 

You may also want to look into some other basic ways of saving money, such as cutting back on subscriptions, negotiating your monthly bills, or learning how to save money on groceries. 

Set realistic financial goals

Once you know what you need to improve (whether that be cutting back on spending, reducing your bills, or putting more into savings), you can create a financial plan. 

Depending on your income, these goals may be small to begin with, but progress is progress, and you should be proud of any positive changes. Do your best to prioritize these goals each month and remind yourself of why you want to achieve them. 

Build an emergency fund

For a starter emergency fund, you should consider saving at least three to six months’ worth of expenses. Examine your budget to determine your emergency fund goal and set up automatic deposits into an accessible savings account. Once you reach your goal, you may decide to continue saving to make sure you’re covered over longer periods.

Seek additional income sources

With today’s technology, there are so many different ways to bring in some extra cash. If you just want to make a few extra spending dollars here and there, you might complete online surveys or use shopping apps that earn cash back at stores. Looking to make more than just extra spending money? You could also start a full-on side business. Depending on your skills and talents you could try selling handmade goods, creating digital products, teaching online courses, and more.

Engage in financial education resources

Learning more about personal finance and how to effectively manage your money sets you up for greater financial freedom. There are many blogs, podcasts, books, and YouTube channels that explain everything from frugal living to budgeting to investing and more. The more that you surround yourself with these educational resources, the faster you’ll learn and have the opportunity to put some of the lessons to good use.

Explore financial education resources for the whole family

The cost of living today can make it difficult for individuals and families alike to live within their means. However, it’s completely possible with a few strategic shifts and mindset changes. While all of the tips above can be extremely helpful in the process, one of the best ways to get started is to learn about budgeting. Check out Greenlight’s blog to explore budgeting basics, various methods, and how to make real changes to your financial situation.