How to Live Within Your Means

Co-authored by Samantha Gorelick, CFP®

Last Updated: October 26, 2021 Approved

Living within your means means more than just balancing your budget. It means being aware of the difference between what you need and what you want. As Mark Twain once said, "Comparison is the death of joy," and if anything, you need to learn to find a way of spending that works for you -- not for your neighbors or best friends. Living within your means requires you to be mindful of how you spend your money, but if you do it correctly, you won't actually be depriving yourself of the things you really need to be happy.

Part 1

Part 1 of 3:

Maintaining a Balanced Budget

This includes things such as groceries, utilities, and clothing. Essentials are things you absolutely cannot do without. You cannot survive without groceries, for example, while you can survive without spending $1000 on clothing each month (even if you don't feel that way!).^{[1]
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Estimate your income. This will probably work best if you use a monthly income. If you are on salary, this is usually pretty easy. However, if you are part-time, unemployed, or a dependent, this may be a bit more difficult. Most likely, your best route is to take your monthly income or budget for the last three months and take an average. While this may not be spot on, it will likely be close enough for you to rely on to make ends meet.
- When you have to estimate your income, remember to remove the amount that you would reserve for taxes. Depending on how much you make, it may look like you have a bit more money than you actually do before you pay your dues to Uncle Sam.
3
Record all of your expenditures. To do this, record what you bought, how much you spent, and where you bought your goods/services from. This does not have to be extremely detailed. “$100 on groceries at Walmart” will suffice. Once again, this will probably be best from a monthly standpoint. See how much you've spent on all of your essential items and non-essential items as well.^{[2]
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Expert Source

Samantha Gorelick, CFP®
Financial Planner

Expert Interview. 6 May 2020.}
- If this is hard to track because you pay for a lot of things in cash (and good for you if you do!) or just can't keep your bills straight, then you can start tracking your expenditures for the current or next month instead.
- There are lot of different ways to track your spending! Some people prefer programs like "Mint" or "You Need a Budget," while other people prefer using a spreadsheet or notebook.^{[4]
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  Samantha Gorelick, CFP®
  Financial Planner
  
  Expert Interview. 6 May 2020.}
See how you fare. If you are significantly in the green, then you’re doing fine! However, if your income and expenditures are equal, then you're not saving any money, and if your expenditures are much higher than your income, then you have a problem. Of course, if you're a student and currently don't have an income, then this will naturally happen, but you can still think about how you can spend less money in the future.
See where your money is going! Start by categorizing your purchases. Make “Essentials” one category. The rest of the categories will be unique to your preferences. For example, one category might be “Eating Out”. Once you have done this, add up all the purchases in that category and create a category total.^{[5]
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Expert Source

Samantha Gorelick, CFP®
Financial Planner

Expert Interview. 6 May 2020.}
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Cut the fat. More than likely, you’ll notice at least one category other than “Essentials” that seems to be eating a large portion of your income. Take a look at that category. See what you can cut out. For example, if you are seeing nine or ten trips to Starbucks under “Eating Out”, try cutting this down to three or four. That could be a quick $25 right there. Continue to cut at the non-necessities until your income is higher than your expenditures.
- Make sure that your purchases align with your values. It's okay to spend money on things that are meaningful to you, but steer clear of purchases that don't line up with those values.^{[6]
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  Samantha Gorelick, CFP®
  Financial Planner
  
  Expert Interview. 6 May 2020.}
- See Part 3 for more information on how to effectively save money.
You may see that your spending has so far outrun your earnings that you'll have to do far more than just cut your expenses if you want to make ends meet. You may need to take on extra hours at work, ask for a raise, or look for a higher paying or part-time job to raise your income. If there are other members in your household, see if another income earner can do the same, or if you have teenager or older children, see if they can take on a part-time job.
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Set saving goals. Create attainable goals within a reasonable timeframe. Maybe your goal is to spend $200 a month. Maybe your goal is to save $120 a month for a trip to Paris at the end of the next year. The more specific and attainable your goal is, the more likely you will be to reach it. If your general goal is just to "spend less money," that is too vague for you to really take initiative or to know if you're getting close to reaching it.^{[7]
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- Try saving money slowly. Once a week or month, automatically transfer a set amount of money to your savings, like $25. As this starts to become habit, slightly increase the amount.^{[8]
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  Expert Source
  
  Samantha Gorelick, CFP®
  Financial Planner
  
  Expert Interview. 6 May 2020.}
9
Save for an emergency. If you really want to live within your means, then you can't let one unexpected event, like a car accident or job loss, completely ruin your finances. You need to save some away for a rainy day, even if you're only saving $100 a month. This money will add up, and you'll feel much more safe and confident than if you're spending your money down to the wire every month without having a penny to spare.
- Even throwing your change in an "emergency jar" at the end of every day will help you mentally prepare to set some of your money aside for the unforeseeable.
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Part 2

Part 2 of 3:

Adjusting Your Perspective on Spending

1
Distinguish between what you want and what you need. Sure, you may think that you really "need" a huge HD TV, but would you really suffer if you got a TV of a smaller size, or stuck with your old one for a while, instead? Do you really need designer shoes or sunglasses, or would you be just as happy with a cheaper pair? Do you need to spend $90 every time you go out to dinner with your beau, or can you go somewhere a little bit cheaper, or have a romantic night cooking at home instead? Realizing that you don't really need all those things you think you need will definitely help you live within your means.
- It's okay to splurge on something you don't really need once in a while, but you shouldn't make a habit of it. And when you do splurge, you should be conscious that your life would be just as good without that thing.
2
Don't even bother trying to keep up with the Joneses. So maybe your neighbors just got a swimming pool or built an addition onto their home; but they may make twice as much money as you do. If you get caught up in trying to keep up with everyone around you, then not only will you never be happy, but you will also never be able to live within your means because you'll be too busy trying to maintain an image that you can never fully live up to.
- Sure, your best friend's new designer jeans look amazing on her. Be happy for her cute new look instead of being jealous and wishing you could afford the same. Jealousy is guaranteed to make you an unhappy person -- and to never be satisfied with what you have.
Being rich doesn't have to mean driving a BMW and vacationing in Capri every fall; it can mean having enough money to keep your family and children happy, and to have some spending set aside for fun with your significant other and some light travel, too. Once you see that this can be your own definition of "rich," you will be able to relax and stop worrying so much about how other people perceive your wealth.
4
Know that spending less money will not decrease your quality of life. So you invite some friends over for some nice wine instead of spending money at a crowded bar. You and your significant other take a road trip to Portland instead of flying there. Does this really decrease your quality of life? Absolutely not. You'll still be doing the things you love -- you'll just be doing them a bit differently. Don't think that you'll be making your life worse if you spend less money.^{[9]
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- In fact, spending less money can increase your quality of life, because doing so will make you less stressed out about wasting money, and you'll feel more at peace with your decisions.
5
Be grateful for what you do have. Instead of focusing on what you wish you had -- a new car, a fancy suit, a larger house -- focus on all of the things you are lucky enough to have. You may hate your TV, but you love your computer. You may wish you had a new coat, but you have so many great sweaters. Make a list of all of the things you do have, and don't just limit the list to the material things -- you may be grateful for an amazing significant other, wonderful children, or the amazing place where you live.
- Being aware of all of the things that you do have will make you less likely to spend impulsively to make up for anything that you feel is lacking in your life.
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Part 3

Part 3 of 3:

Saving Money

1
Eat at home whenever you can. Eating at home doesn't have to be less exciting than going out to eat. Eating at home will make you be a better cook, be more conscious about what goes into your food, and it can even create an intimate atmosphere for a date night or a social gathering. And, of course, it saves money too. If one of your biggest expenditures comes from going out to eat, try to cut down how many meals you eat out by two a week, and then reduce that number further until you see that you're happy if you only go out to eat once every week or two.^{[10]
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- Of course, sometimes you have to go out to eat -- for a coworker's goodbye party, or a friend's birthday, for example. When you do eat out, though, you can be conscious of what you spend. Don't show up starving or you'll be likely to order too much food and spend too much money.
2
Wait for sales. You should never have to buy something at full retail price. Wait for the items to go on sale, get coupons if you can, and just have the patience to know that anything you really want will eventually cost less money.^{[11]
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Expert Source

Samantha Gorelick, CFP®
Financial Planner

Expert Interview. 6 May 2020.} You don't have to get the newest version of an iPod or a video game the second it comes out; wait a few months for the price to go down and you could be saving hundreds of dollars.
- There's nothing wrong with buying second hand, either. You can find great clothes for great prices at a thrift store.^{[12]
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  Samantha Gorelick, CFP®
  Financial Planner
  
  Expert Interview. 6 May 2020.}
Throw a party instead of going out to the bars with your friends. Invite people over for a movie night instead of spending $15 a ticket to go see a movie on the day it comes out. Having fun in your own home can be even more enjoyable than going out because you don't have to deal with strangers and can control what you eat and drink. So, the next time you want to have a social event, invite a few friends over instead of hitting up the pricey and noisy bars.
4
Cancel the subscriptions you don't need. You could be spending over $100 a month on subscriptions that you don't really need. Cut down on your spending by eliminating some of these subscriptions from your monthly bills.
- Gym membership. If you only hit up the gym once or twice a month, cancel that membership and go running instead.
- Netflix membership. Save money by only paying to stream from Netflix instead of paying an extra fee for ordering DVDs when you never use this feature.
- Magazine subscription. If you only read one or two articles in the magazine that comes each month, then you're better off saving your money and catching the news online, or reading the magazine at your local library.
Go to the library to borrow a book instead of paying for one at the store. Borrow a DVD from a friend instead of paying to rent it. Borrow a dress that you'll only need to wear once from a stylish friend instead of spending a lot of money on something you'll never wear again. Share your stuff with your friends and they will do the same with you. Borrowing is a great -- and fun -- way to save money.
Have a garden. Gardening is not only a fun and relaxing hobby -- and one that has been shown to increase your lifespan -- but it's a definite money saver. Instead of spending money on vegetables and herbs every week, make a one-time investment in a garden and see how much money you save every week.^{[13]
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Don't ever shop without a list. Whether you're going to the grocery store or the mall, you are much more likely to spend impulsively and recklessly if you just roam around buying whatever you think you need. Instead, be prepared with a thorough list every time you shop, and do not stray from it unless you see something that you really need but forgot to write down.
- Even if you're going to the mall and only buying three items, writing them down on a list will make you more aware of buying something you didn't intend to take home.
If you see a brand-new jacket or a nice pair of shoes at the mall or while you're shopping online, don't buy the item the second you decide you can't live without it. Instead, give yourself 48 hours to really think it through. Maybe you'll find that you really don't need the item after all, or that you're able to find a less expensive substitute. If you have thought it through and decide that you really do need it, then you will feel better about your decision.

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Where can I find more information about appropriate wages for different jobs and apprentices?

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If you live in the United States, the federal bureau of labor statistics' website would be a good place to start. You can see average wages and descriptions of different jobs and occupations.

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How can I get my expenses under control?

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Use a free monthly budget template from Google or buy a booklet from your local grocer, fill it out and every paycheck go over the bills or expenses. Don't use your card for anything, except bills. Pull the remaining out of your account that isn't for savings and use the cash for anything you need. When the money is out, don't spend any of the remainder as it is for your bills. Eventually you will start saving the cash on hand because you want it to go further.

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Don’t go overboard with the cutting. You work hard, and you’re entitled to treat yourself too. If you don’t treat yourself every now and then, you’ll find it harder to keep on your budget.

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Impulsive spending should also be curbed. A good rule to follow is, if you can't afford two of them, you shouldn't buy the item.

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If you are able to cut your expenditures significantly, use the surplus to save for a rainy day.

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