How To Live Below Your Means The Right Way


Living below your means is definitely possible. Often, it’s just a matter of making different choices.

Most of us spend a significant amount of money on everyday items killing the possibility of achieving financial freedom. Here are some suggested ways to get started.

Take Control Of Your Money

The key to living below your means is gaining control of your own money. What I mean by this is knowing your take-home pay and how much you spend every month. That’s it. Nothing more.

We’re not talking about doing a super detailed analysis of every expense you make, logging everytime you spend $5 on a Starbucks coffee, or feeling guilty every time you decide to have a nice steak dinner.

Money Ying-Yang

I believe in balance, you know, the ying-yang concept where everything should live in harmony while not over-emphasizing one thing.

This is the big reason I’m not a fan of tracking every expense. It’s like going on a diet, weighing and noting every calorie. Yes, it can and will work, but is it something you can do now and forever? There’s a reason why diet fails, its because the changes and work involved to implement them disrupt your everyday life too much, you eventually give up.

I’ve done it. I used to be a huge fan of Microsoft Money, a personal finance software like Intuit Quicken, that allowed me to connect all my bank, credit union, credit card, car loan, and any other financial accounts I had. At the end of the month, I’d sync everything up in MS Money, re-classify the transactions that got put into the wrong bucket (it was frequent and often with others reporting about 60% of transactions requiring re-categorization!), balance my checking, and reconcile every transaction with every receipt I got that month. Whew!

At the end, it painted a nice pretty chart of how much I was spending in each category (Ie Utilities, rent, car, etc).

I actually did this for the first 9 or 10 years when I got serious and took charge of my money. Once I got a kid, re-married, I had expenses going out from both of us and tracking it all got to be impossible. Doing my monthly analysis used to take about an hour, afterward, it was taking up half of a Saturday!

So guess what I did, I gave up! I couldn’t do it any more.

Simplified Money Tracking

What’s been working for me the past 20 or so years now has been a simplified money tracker. It requires:

  1. I deposit all my paychecks into 1 checking account
  2. I have a saving accounts at the same bank as my checking account
  3. I consolidated all my spending and my wife’s spending on 1 credit card. Two actually since we also have a Costco credit card we use for Costco purchases.

<<short video on money movement>>

At the start of a month, I gather every bank statement and credit card bill.

At the top of my Checking statement I log on a spreadsheet:

  1. Total Amount Of Deposits Made
  2. Total Amount Of Debits Paid

*verbiage will vary, but they all sum it up like this

At the top of my credit card statements I log on the same spreadsheet only 1 thing:

  • New Purchases

My spreadsheet looks something like this:

SIMPLIFIED BUDGET TRACKERNov 2018Dec 2018Jan 2019Mar 2019Apr 2019
Checking Acct – Deposits$1,230.00$1,230.00
Checking Acct – Debits$743.32$755.58
Credit Card – New Purchases$459.93$474.87
TOTAL SURPLUS:$26.75-0.45

I can do all of that within 30 minutes now. It’s that simple to take conquer your money and understand what you have at the end of every month. This is the first and most important step in living beneath your means.

Once you make this a habit, you can start to make self-imposed adjustments to your daily habits. Again, no need to dig in and analyze every purchase you make and every purchase your spouse makes. If you feel you can reduce or eliminate a purchase decision, do it.

Start Saving Today

No matter your situation or how much debt you have, start saving today.

How can I start saving money when I spend more than I make?

So with friends that I’ve helped, this is a common roadblock. They are adding to their credit card debt every month. So they feel there is no possible way they can start saving money.

My advice is that the habit of saving money is more important than the quantity you save when you are in an over-spending situation. You’re not going to change your over-spending overnight, but the habit is great for morale no matter the size of the nest egg.

As an example, if you’re currently over-spending every month, we need to work on that…later. The finance guru’s would tell you,

Step 1, pay off all your debt.

Step 2, start building an emergency fund

In the perfect world, yes, that would be the ideal steps to take. But we want success and don’t want this to be like the next fad diet you try.

So if you’re over-spending, start small with your saving account. Being able to save money in this situation is a morale victory. Take these steps:

  1. At the bank or credit union you’re currently depositing your paycheck to, open a savings account
  2. Get online access to your accounts
  3. Setup a monthly transfer of $5.00 (if paid monthly) from your checking to your savings account, and have it occur the day after you normally get your paycheck. If you get paid weekly or bi-weekly, setup an auto-transfer of $2.00 after every paycheck.

It’s as simple as that.

We can now add a new line to track in the Simplified Budget Tracker spreadsheet to follow our growing savings account. We can that completely separate from our budget tracker though.

SIMPLIFIED BUDGET TRACKERNov 2018Dec 2018Jan 2019Mar 2019Apr 2019
Checking Acct – Deposits$1,230.00$1,230.00
Checking Acct – Debits$743.32$755.58
Credit Card – New Purchases$459.93$474.87
TOTAL SURPLUS:$26.75-0.45
Savings Acct – Balance$335.00$340.00

Separate Your Medical Insurance Plans

If you are married and both are working, it’s common to see one spouse carrying a family medical plan and the other not using their medical insurance benefits.

If that’s you, I’ve got great news! You can immediately lower your expenses with one simple hack.

Most employers will pay for a portion of your medical insurance for the employee. But many will pay nothing towards your spouse or children.

So the hack is take advantage of the generous offer your employer is offering.

One spouse has their own medical insurance plan. The other has their own. If you have kids, put them on the medical insurance plan that is better or cheaper.

<<short video showing employer contributions savings>>

Live Off One Income

If you have a significant other and are living together, lucky you! Two incomes are always better than one!

Now, this is an unpopular subject, but hear me out. Rather than being stuck on that rat-wheel of life where you’re constantly running and running and running going absolutely nowhere. Try something radical. And this is very radical thinking for most couples.

You may not be able to do it from day one, but the goal would be to live off of one income.

Later in my career, I made significantly more than my wife. With the debt we amassed, mainly in our house, it would have been too costly to cut that expense to get us living just on her income (yes, we over spent on a house we couldn’t afford, which is another mistake I wish I could go back in time and fix!). So I never achieved that nirvana, but we decided a nice compromise was to pay for the mortgage on my income and live on her income for everything else. That was a simple plan we could easily implement which put us on the path to financial freedom.

Benefits Of Living Off One Income

  1. Your stress will go down dramatically, promise.
  2. If one of you get laid off or have to quit unexpectedly due to illness, everything will be OK!
  3. You won’t be in fear of getting fired. You are free to do what’s right in your job rather than what won’t get you fired.
  4. If you are fortunate to get pregnant, you have a choice. The choice I mean here is to have one of you stay home full-time to raise the baby. You don’t have to do that, but you’ll have the choice, which is true freedom.
  5. And there are many other benefits!

Steps To Living Off Of One Income

  • Assuming you are in an over-spending situation every month, you’ll have to make adjustments over time. It may take you 1 or 2 years to achieve living off of one income, but at least you have a plan to get there.
  1. GOAL 1: Follow our steps to get to where you’re living within your means (you’re income and expenses are equal)
  2. GOAL 2: Then aim to be living beneath your means (your income is great than your expenses)
  3. GOAL 3: You’ve come a long way and have achieved success. You can stop here but I encourage you to take it one step further and get to where you can live off of the person with the largest paycheck.
  4. GOAL 4: The final step is to align your expenses to where you can live off the person with the smallest paycheck.

Reduce Subscriptions

You’re probably thinking I’m talking about reducing that magazine subscription of yours. Yes, that is sort of true, what I’m really looking at here is reducing anything you have a subscription for. A subscription is something that you’re signed up to pay every month and it happens automatically.

The danger to a subscription is that you may end up paying for something, every month, and not getting any value out of it. Hint, hint, that $20 per month you’re spending at the gym. I’m a big fan of Crossfit, so for me I put my monthly Crossfit membership into the Mandatory category, and I use it 4-5 times a week. So I’m getting great value out of it. I’d greatly prefer you keep that gym membership, use it, and get value out of it. It’s all part of that work, life, health balance we should all try to achieve.

This is one time we’ll ask you to list out every item you currently have on a subscription. Some common ones are:

  • Cell phone bill
  • Gym membership
  • Car insurance
  • Timeshare
  • Credit Card fee (many reward credit cards charge an annual fee such as $45/yr, $99/yr or more)
  • AAA membership fee
  • Netflix
  • Cable TV

Now decide if each of these are Mandatory (ie vehicle insurance), Optional, or a Want type of expense.

Reduce Mandatory Expenses

You can’t get rid of these, but you might be able to reduce the monthly cost. Maybe you have to switch insurance carriers. Or perhaps if you’re a safe driver, consider raising your deductibles. There are choices and it’s worth a look to see if you can shave some money here.

Reduce or Eliminate Optional Expenses

So you have these Optional Expenses to work on. Common ones are food, clothing, and transportation. Here are some food tips:


  • Avoid eating out. Even at a fast-food restaurant, you’ll pay three to seven times more for a meal than you would if you cooked at home.
  • Shop at large grocery stores or food warehouses. Avoid high-priced convenience stores and smaller “boutique” grocery stores.
  • Buy store brands. They are usually less expensive than nationally advertised brands but the quality is often just as good.
  • Make a shopping list—and stick to it. Avoid buying food on an impulse and don’t shop on an empty stomach or you may come home with more than you planned to buy.
  • Pack a lunch for work or school instead of going out.
  • Use coupons or “membership” cards at grocery stores—but only buy the item if it’s something you use anyway.
  • Compare the unit prices of products. Buy whichever product is less expensive per ounce, per pound, per pint, and so on.
  • Take advantage of two-for-one sales if the items are things you use anyway.
  • As much as possible, avoid purchasing junk food such as potato chips, pretzels, soda, and candy. Junk food is usually quite expensive, especially when you consider that it offers little nutritional value.
  • Stock up on sales of items you use regularly such as paper products and canned food.
  • In some instances, you may qualify for emergency food stamps, which will help cover your grocery bill during a money crisis. Although it usually takes about a month to qualify for food stamps, emergency approvals may be given in about seven days.

Clothing is an easy one to cut back on (if you’re a dude). But either way, here are some things to try:


  • Garage sales and flea markets can be fantastic sources of quality clothes at great prices. If you’re willing to try this route.
  • Set up a clothing exchange with friends or neighbors to trade your adult and children’s clothes. What’s old to you will be new and exciting to someone else.
  • Regularly visit thrift stores. The inventory usually changes frequently.
  • Check out clothing sales sponsored by local churches or service groups.
  • Some stores accept used clothing, price it, sell it, and give you some money back on the items you bring in. These are called “consignment stores.” Look into consignment stores for clothing for both kids and adults. You can earn a little money on clothes you consign and either apply the credit toward another purchase in the store or take the cash someplace else.
  • Stick with classics whenever possible. They stay in style longer than the latest trends.
  • It may be hard to find good used shoes for children. Look for sales, but don’t let a sale convince your child that he or she needs $80 running shoes. Instead, help them distinguish between wants and needs.
  • Our preference is to buy new clothes. I’ll frequent Ross and Marshalls. They are new but may be slightly out of date or have a slight manufacturing defect. I’ve found great deals over the years from both of these store brands that are in practically every city.

A car is a huge expense for most people, as it’s common for people to lease or have a monthly loan payment. I’m a car nut, specifically a sports car nut. Looking back, I probably could have attained financial freedom 10 years earlier had I not been so dumb in my attitude toward my car!

Here are some tips, many of which I didn’t follow, but wish I had:


  • If your community offers a carpool matching service, try to find someone to share rides to work.
  • If you live close to school or work, try walking, in-line skating, or biking. You’ll get exercise and save money on transportation.
  • Take advantage of public transportation if it’s available and delivers you to your destination in a reasonable time.
  • Perform regular maintenance on your car —such as changing the oil and coolant— as well as keeping the tires properly inflated. Your car will run more efficiently and you’ll save money every month.
  • Refill your tank at gas stations that regularly have the lowest prices on gasoline and try to avoid more expensive stations.
  • If you’re buying a car, consider a good used model instead of a new one.
  • Purchase the vehicle with the best gas mileage rating that will serve your needs.
  • Every two years, shop around to be sure you have the best deal on vehicle insurance.
  • Before you purchase a car, call your insurance company and get an estimate. Some models may have high-theft rates or be popular with teenagers, which could make it an expensive car to insure regardless of your stellar driving record.

Pick The Home You Need, Not What You Want

Here’s another very hot topic that will definitely bring strife with couples. I like a nice house, but if I were broke, I could easily live in an apartment with four walls. All I need is for it to be clean, quiet, with a good parking situation. My wife on the other hand……

I watch on TV’s show House Hunters International where the couple is looking to move abroad. And they’re moving to Paris. They want to live in the city center, close to the subway and all the shops and restaurants. Basically, where EVERYONE wants to live. And their requirements are always, and I mean, always, 2 bedrooms. They want that second bedroom for visitors.

So my point is, if you’re in an over-spending situation with finances, housing is the biggest expense you have in your life. Prioritize what matters most. Some suggestions:

  1. Safe neighborhood
  2. Good schools (if you have kids)
  3. Convenient to work
  4. Large enough (do you’re two babies really need their own bedrooms right now?)
  5. …and everything else after that is optional priorities

Get Your Car Detailed

This is some advice I wish I could tell my younger self! I got in the habit of buying and selling a car about once a year. Some were new, some were used, but it was a very bad habit I had. I wasn’t broke, in fact I was doing exceptionally well on my financial independence plan and felt I could afford that luxury. And most of the time I paid cash for the vehicles so it didn’t really hurt to do this.

How dumb I was! I was paying about 6% in sales tax every time I bought a car. I was also buying retail and trading in my car at wholesale. I lost money on every car I sold and there was no way around paying retail prices for a car. I was out thousands of dollars every time I did this.

How did I get out of this habit? I splurged on my existing car once a year. I took it to a really good car detailer and had them steam wash the engine, clean the interior, and clay bar or buff the paint, with a full polish and wax. I had them PDR (paintless dent repair) all the door dings and fix the wheel scrapes. Basically, I had the car cleaned up as if I had bought a car from a dealer’s lot. In the end it cost me about $350 every year, but it was WAY CHEAPER than buying and trading in a car.

The car felt like a new car to me and I was finally able to rid myself of the terrible buying cycle of cars. I hope you don’t have to go to this extreme like I did. You may simply get away with a nice car detail for about $150. If that’s what it takes to convince yourself to keep that car, it’s money well spent. Try it when you get that bad urge to buy a different vehicle.

Reduce Interest Charges

If you’re like most people, you have a car loan, multiple credit cards, and maybe a mortgage. All debt related items each with their own interest rates.

Car Loan Interest

For a car loan, it’s worth checking with a local credit union if you can reduce your interest rate and moving your car loan there. But follow these tips if you do that:

  1. Move your car loan if you can get 1% or more lower interest
  2. If you do move your car loan, try to match your remaining months of payments. For example, it’s common to have a 9% interest rate car loan with say 22 months left. Your credit union is offering 6% interest, so you decide to move it, but you end up getting a 36 month loan. You’ve effectively lowered your interest rate, but extended the number of payments (you’d have to do the math to see if you’re actually saving money since there are more payments). If you do this, see if they’ll do a 22 month or a 24 month loan instead of 36. The goal here is you’re not trying to lower your monthly payment, you’re trying to lower how much interest you end up paying for the car.

Credit Card Interest

For credit cards, you may have one with 19.6% interest and another with 9.9% interest. Read the fine print that nobody reads and see what your rate is today. Don’t assume what it was when you signed up is the same as it is today!

If you end up with this situation, call your credit company with the lowest rate and tell them you’re consolidating all your credit cards down to 1 card. Ask if they can:

  • Assist with transferring the balances from your other cards
  • If needed, increase your credit line (to match the credit line you’re eliminating from the other cards)

Mortgage Interest

This may not be worth pursuing, especially with all the regulation changes that have happened since the 2008 housing crash, but it may be worth looking at the interest rate on your mortgage and seeing if you can refinance it.

Like refinancing a car loan, don’t get more months to your mortgage with a refinance. Ask if they can match the remaining months you currently have or get close to what you have remaining. 30 year mortgage isn’t the only option! 25 year, 20 year, 15 year, and even 10 year mortgages are available from different lenders. But you have to ask. They would love for you to refinance for 30 years with them and pay them interest on that money for the next 30 years!

Increase Your Credit Score

The last tip I have for you is to increase your credit rating. It’s a little known fact, but your credit rating is used in all sorts of ways to judge you.

  • Employers may look at your credit grade to see if you’re an eligible employee or ready for that promotion
  • nsurance companies may use your credit number as a factor in how high your payments are
  • Your mortgage interest rate is definitely impacted by your credit rating

Increasing your credit rating not only will help how others judge you as a responsible human being, but it can also lower your monthly expenses.

We’re a big fan of a service called Identity Guard. They have all sorts of services to help you increase your credit profile, but the only one we’ve used and found useful are:

  1. Monthly credit reports (it’s a close approximation) from Experian, Equifax, and Transunion. The big 3 credit bureau’s everyone uses.
  2. Monthly credit reports. You can see what is in your credit report from all 3 credit bureau’s. Positive and Negative factors are things I focus on.

Get A Costco Membership

OK, this may sound contrary to what I said earlier about lowering your subscription costs. But if used wisely, shifting your purchases to Costco can definitely lower you overall costs. Think of things like:

  • Toilet paper
  • Paper towels
  • Meats
  • Drinks, liquor, bottled water
  • And all sorts of other consumables you use in your everyday household life

A trick to shopping is to look at the “per unit cost”. You may buy a pack of water at Safeway for $5.99 and a pack of water at Costco is $10.99. But when you do the math to figure out that the a bottle at Safeway costs you $0.30 each and the one at Costco costs you $0.10 each, you see that the initial cost may be higher, but the per unit cost is lower.

<<short video showing cost per unit math>>

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Back To You

Wow, this was a long article. If you made it this far, thank you! Hopefully it means you found enough useful stuff in here toward achieving financial freedom.

If you have any questions or have any suggestions on how to live beneath your means the right way, let me know below!

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