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Episode 2937:
Jackie Beck explains the concept of "living below your means" as a path to financial freedom, breaking down how spending less than you earn builds security and lessens financial stress. By managing expenses, budgeting, and cutting unnecessary costs, she shows how anyone can take simple steps to achieve a less debt-ridden, more fulfilling life.
Read along with the original article(s) here: https://www.jackiebeck.com/what-it-means-to-live-below-your-means/
Quotes to ponder:
"Living below your means is about saving some of your money so you can afford things in the future or in case of an emergency."
"If it feels like deprivation, I’d argue that you’re doing it wrong. Because even if you do reach your financial goals, what’s the point if you’re completely miserable?"
"Money is a tool we can use to build a life of meaning. Financial freedom needs to be way more interesting than consumerism."
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[00:00:57] This is Optimal Finance Daily. What it means to live below your means. By Jackie Beck of JackieBeck.com.
[00:01:07] Have you ever heard the phrase live below your means? It's a popular piece of financial advice, but what does it actually mean? And more importantly, how can you do it?
[00:01:18] In this post, we'll break down what it means to live below your means and share some tips on how you can start doing it today.
[00:01:26] Defining what it means to live below your means. In simple terms, living below your means is when you're spending less than you earn.
[00:01:35] For example, suppose you bring home $4,000 each month after taxes. If you invest some, save some, and spend the rest, you're living below your means. Why? Because you aren't spending everything you earn.
[00:01:49] This means that you're not using all of your income to fund your lifestyle. Instead, you're saving some of your money so you can afford things in the future or in case of an emergency.
[00:02:00] How to tell if you're already doing this.
[00:02:03] Take a minute for at least a gut check of your situation.
[00:02:06] Do you need to use credit cards to make ends meet?
[00:02:09] You're not yet living below your means.
[00:02:11] Do you send money to savings and investments each month and usually have extra money sitting in your checking account?
[00:02:18] You're likely already in good shape.
[00:02:21] If you're not sure where you stand money-wise, start by doing a check of your accounts and tracking your spending over the next 30 days.
[00:02:29] The benefits of living below your means.
[00:02:32] Living below your means is a great way to build financial security and freedom.
[00:02:37] It's also a great way to grow your wealth over time.
[00:02:39] Some of the benefits of living below your means include...
[00:02:44] Number one, more money and savings.
[00:02:47] When you live below your means, you'll have more money left over each month to save.
[00:02:52] Having money in savings makes dealing with emergencies, buying big-ticket items, and doing fun things much easier.
[00:03:00] Number two, less stress.
[00:03:03] This is huge.
[00:03:04] Living paycheck to paycheck can be stressful.
[00:03:07] By living below your means, you can reduce stress and live a happier life.
[00:03:12] And number three, improved lifestyle.
[00:03:15] When you live below your means, you'll have more money to spend on things that improve your lifestyle, like travel and experiences.
[00:03:22] This is because you won't be spending extra for everything by being in debt.
[00:03:27] How to start living below your means.
[00:03:30] If you've determined that you're not yet living below your means, here are some ways to start.
[00:03:35] The most obvious way is to cut back so you can spend less than you already earn each month.
[00:03:41] This can be done by reducing unnecessary expenses, both large and small.
[00:03:46] Another way to live below your means is to go the other direction and make more money than you spend.
[00:03:51] And of course, you can work at it from both directions by working to spend less and make more.
[00:03:58] Tips for living below your means.
[00:04:01] Here are a few tips to help you live below your means.
[00:04:04] Number one, track your spending.
[00:04:07] The first step to living below your means is to find out where your money is going each month.
[00:04:12] This can be done by tracking your spending for a month or two.
[00:04:16] As you learn where your money is going, you can start making changes to save money.
[00:04:21] This is especially useful if you align your spending with what's important to you.
[00:04:26] Number two, make a budget.
[00:04:28] Next step is making a budget.
[00:04:31] A budget will help you live below your means by telling you how much money you can spend each month.
[00:04:36] A zero-based budget is especially helpful.
[00:04:40] Number three, cut back on expenses you don't truly need or want.
[00:04:44] One of the best ways to save money is to cut back on unnecessary expenses.
[00:04:49] By doing a budget and putting things in order of how important they are to you,
[00:04:53] you can find areas to cut.
[00:04:55] Sometimes even painlessly.
[00:04:58] Number four, pay yourself first.
[00:05:01] Wherever possible, send money to savings and investment accounts first.
[00:05:05] That way, the money will go to where it needs to be right away versus possibly slipping away like water.
[00:05:12] Make sure you have an emergency fund as well.
[00:05:16] And number five, get out of debt.
[00:05:18] Getting out of debt, especially high interest debt, is key.
[00:05:22] When you're carrying around a balance on your credit cards or making loan payments each month,
[00:05:27] it's tough to live below your means.
[00:05:30] That's because a good chunk of your income is going towards paying off debts, leaving less money for other things.
[00:05:36] So if you want to start living below your means, one of the best things you can do is work on getting out of debt.
[00:05:42] Once you're debt-free, you'll have more money each month to save and invest.
[00:05:46] This can help you reach your financial goals a whole lot faster.
[00:05:50] Final thoughts.
[00:05:52] Ready to start making this a reality?
[00:05:55] It's easier than you think.
[00:05:57] Just take it one step at a time, and before long, you'll be on your way to financial freedom.
[00:06:02] It's a great way to live.
[00:06:07] You just listened to the post titled,
[00:06:09] What It Means to Live Below Your Means,
[00:06:12] by Jackie Beck of JackieBeck.com
[00:06:15] And I'll be right back with my commentary.
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[00:07:50] When I think about what it takes to win financially,
[00:07:54] living below one's means is really the only way to do it.
[00:07:57] But I think for this to be a sustainable way of life, you need to find some joy in it.
[00:08:04] If it feels like deprivation, I'd argue that you're doing it wrong.
[00:08:08] Because even if you do reach your financial goals,
[00:08:11] what's the point if you're completely miserable?
[00:08:14] Money is a tool we can use to build a life of meaning.
[00:08:18] But to do this joyfully, we need to have a genuine interest in living differently.
[00:08:24] Financial freedom needs to be way more interesting than consumerism,
[00:08:28] and we need to internalize the belief that the best things in life are free.
[00:08:34] I personally had to learn to enjoy the simple things in life,
[00:08:38] like reading free books from the library,
[00:08:40] taking walks around the neighborhood,
[00:08:42] and preparing luxurious meals at home.
[00:08:45] When I started living below my means,
[00:08:47] I spent less time partying and more time journaling,
[00:08:52] working out, and learning to enjoy my own company.
[00:08:55] I came to enjoy the challenge of getting my needs met
[00:08:59] through resourcefulness and creativity
[00:09:01] versus the luxury of meeting my needs
[00:09:04] through the swipe of a credit card and mindless spending.
[00:09:07] But that'll do it for today.
[00:09:09] Thank you for listening.
[00:09:10] Have a great rest of your day.
[00:09:11] And I'll see you for tomorrow's show,
[00:09:14] where optimal life awaits.