Living below my means

It is important to live within your means so that you do not get into debt.  However I like to live below my means as that is what has made me more secure and reach my financial goals of paying off my mortgage, getting out of debt, and retiring early.

What does living below your means entail?

It is literally spending less money than your income, but meeting basic needs.  My bills are therefore covered, and I live frugally so that I can do this.  I spend less on food and energy than most house holds, but we spend enough so that life is not uncomfortable.  It isn’t about deprivation and living like a pauper.  If my income was not enough to meet my basic needs comfortably, I would find another income, or go back to work.  It just means that I prioritise my needs over wants, and make sure that I have a small excess in my income to save into an emergency fund, and budget into my sinking fund.

I hear so many people say that they can not afford to live below their needs as their income is not enough to get by on.  At the same time they buy take aways every week, have lavish holidays, and regularly buy the newest, up to date electrical item. I was sucked into that at one point in my life, as I started getting promotions and so felt rich and as if I deserved luxuries.  Although I had a good wage, I had credit card debt (on an interest free card), my sofa was on interest free store credit, I had to re-mortgage my house for a new roof and new windows (and then had to re-mortgage it again for a custody case).  I could just about meet the payments every month and so thought that I was living within my means. I wasn’t as I never had any spare money during the last couple of weeks of the month.  All the repayments for my debts were taking a big chunk of my monthly income.   I had no spare money to put in savings. This made me believe that I could not live on less, until, of course, I had to.

Having said that I do know that there are people out there who are on very low incomes that cannot for health reasons, care reasons, or many other reasons, increase their income or easily live below their means.  They are struggling to survive on the income that they have.  We live extremely frugally and do a lot of things outside of the box to ensure that we can live this way. I appreciate that not everyone can do that.  There may be benefits that you are entitled to, or other resources, and so it might be an idea to seek some advice from agencies that could help or support you.  Last year when we were struggling, and a local community fridge really helped us get through a couple of hard months.

Even though I am on a very low income, I now make sure that I live below my means every month and put some money in my emergency fund. It goes out as a direct debit on the day that I get my pension.  Sometimes I have to take a bit back if we are having a lean month, but most months it stays there. This means that any unexpected expenses are covered and I do not have to use a credit card.  I never want to get into the position again that I found myself at 48 when I was heavily in debt, ill, and it looked like I was losing my job,  my house, and everything I had worked hard for.  I now put money into a sinking fund as well to cover all the big annual expenses like the MOT for the car, insurances, and opticians bills etc.  By having an emergency fund and a sinking fund, I have more choices of where my money is spent (it is not automatically disappearing on a debt payment), and I can choose whether I want to work or not (I have a small private pension).  When I worked, I didn’t feel like I could turn down over time, even when I was tired, as thought that I needed the money.

Living below my means doesn’t mean we don’t have a life.  We have plenty of breaks away, eat well, and enjoy our simple life.  I have just found ways to cover my basics more cheaply so that I can still enjoy things that I like doing, whilst living below my income.  I don’t have the latest phone, a new car, and my home hasn’t been updated for about 8 years, but these things are not important to me.  Having holidays and breaks away are as they are good for my mental health.  One person’s basic priorities maybe very different from another person’s and there is not right and wrong.  It is important that you keep up with home improvement though, like I had to have my roof mended last year.  If I had left it, it would have caused more damage.

In fact, it is really important that when living below your means that you do not deprive yourself, miss out on opportunities, or neglect areas in your life that are important.  This may be your health by eating cheap, unhealthy food, or not having your heating on enough so that your house goes mouldy or it makes you ill.  Your wellbeing is what is important.

What are the advantages of living below your means?

1. I live below my income as my financial wellbeing is important to me.  I have less anxiety and it has really reduced my stress..  I do have to forgo instant gratification lots of times, but it  doesn’t mean that I don’t get what I want.  I just have to save for it, find it second hand, or find another way to make the money for it (like selling things) so that I do not get into debt.  The minute I step into debt is when I am living beyond my means again.  A mortgage is the only debt that I would get into now, with hindsight, if I was 30 again.  If I had rented, and not paid off my mortgage, I would not have been able to retire early.
2. When I started to find ways of cutting down my outgoings and living below my means, I was able to start paying off my debts, which in turn reduced my outgoings.  I was able to start saving, and eventually paid off my mortgage early.  I therefore attained my financial goals which had once felt impossible.
3. It gives freedom.  If I was working and living below my means, I would not have had to stay in a job that I hated for so long.  I would have been able to change jobs, even if the wage was less.  I now have the freedom to work or not.  Odd times I have done a bit of work to earn a bit of money.  One time I did some freelance writing, and another time I acted as a consultant for a care company for 6 weeks.  Both jobs increased my stress levels and reminded me that I no longer like to be tied down, or have a set routine. I am therefore making the right choice for me in not working.
4. It helped my relationships because I wasn’t stressed, grumpy and always worried about a big bill coming.  I now have my set budgets and so I know what I can spend, but also have £50 a month to spend on what I want so that I can buy a present, treat myself to something, or have a drink with a friend.
5. I am more grateful for what I already have and my mindset about money has changed for the better.  The thought of getting into debt to buy something stops me from letting loose with the credit card.  I only spend intentionally and don’t buy things that I am not in love with, or don’t really need.  I get so excited when I have got something new eg. my sausage maker as a present.  I feel so much more appreciative.
6. I don’t waste my time on retail therapy as it only brought short term relief and would leave me feeling more anxious when I got the credit card bill.  Now I find better ways to spend my leisure time that improve my health, like a walk in nature.

How do I start living below my means?

1. I started by tracking my outgoings and expenses, and finding ways to reduce them. Track when you are spending money, and not just how much.  I found that my spending was connected to my mood and hormones. I was therefore more aware and could put other strategies in place. I now put an X on my calendar for a no spend day, and a smiley face if I have a good day. If your outgoings are still less than your income it is important to find another source of income if you can, at least until any debt is reduced.  If you are accruing lots of interest on debt, there are agencies that will help you for free. This stops outgoings increasing and lowers anxiety.  One of my friends has been paying off his debt for 5 years now with out any extra interest.  He no longer fears a knock on the door, or an envelope through the post.  He got help from Step Change.  This organisation do not charge but will deal with your creditors and get the interest stopped.  They then work out reasonable repayments on what you can afford.
2. Make a budget and try to stick to it.  It is important that the budget has some leisure and fun in it as well, though there are a lot of leisure pursuits that are free.
3. If you need to make any large purchases do your research and try to save for them.  There are things like cash back sites, the Blue Light card, etc that can reduce purchases further.  Maybe you could buy the item second hand.
4. Shop intentionally. Ask yourself if it is a need or a want  before you buy something unintentionally.
5. Don’t be pressured into spending money that you don’t want to by family or peers.  Be honest with them.  Don’t feel like you need to keep up with the neighbours either.  Real friends and people who love you will want to support you in your venture to reach your financial goals.  What does it matter what other people think?  My work colleagues sneered at me when I turned up in a battered old car to work, but they have still been having to work for the last 10 years, whilst I haven’t.
6. Pay in cash and don’t carry your credit card if you find yourself over spending or unable to stick to your budget.
7. Shop out of your cupboards and freezers and make a meal plan from what you already have to reduce waste and your food budget.
8. If you get some extra unexpected money from somewhere, like a tax refund, bonus, or energy rebate, don’t just blow it all.  I usually put half of it in my savings, stock up on some food, and buy us a little treat like a cheap break away.
9. Work with your partner, or as a family to reduce your outgoings.  Make it fun and a challenge.
10. Be honest with yourself and do some reflection.  Are there any reasons that you have been living beyond your means, or are there other things that you can do to save money?  There is lots of frugal advice on this site.

The biggest tip that I would say to help you live below your means is to find a balance between reducing spending, but still spending enough to have a reasonably comfy life.  Don’t be too restrictive and make yourself miserable as this is a habit that will help you for the rest of your life if you can keep it up.  Do you have any tips for living below your means?

Here are some links to a couple of articles that may help

low income tips to survive and thrive

living on a low food budget

budgeting

Easy ways to cut down on costs of leisure

Sinking fund

getting out of debt