Living below your means has almost become a cliché. It is widely used but rarely practiced. The idea of living below your means is exciting but requires great discipline to implement consistently.

To live below your means simply implies spending less than you earn. It means having fewer expenses and more income.

The secret to wealth creation is not earning money but multiplying what you earn. This is the whole idea of investment. Investment is the process of having money work for you; using money to make money.

No matter how much you earn, if you cannot multiply it, it will diminish rather than increase. This way, you become poorer rather than wealthier.

This is the mistake most people make; they think the ultimate goal is to get income. That is just a step in the progression of wealth. Read How to create wealth the easy way to understand more.

If therefore, investment is the vehicle by which wealth is created, it means that you have to save enough money every month to put in a deal.

How do you save if you do not live below your means? It is impossible.

Savings + Consumption = Income.

·     Consumption accounts for every expense you make that does not bring you extra income (This includes food, rent, fuel, gifts to friends and family, children’s school fees, etc.)

·     Savings refer to everything you put aside for investment purposes. This does not include what you save for precautionary purposes (An emergency fund).

Therefore, savings equals investment. We assume that you invest everything you save. Many people don’t. They save only to consume in the future.

·     Income is everything you get after all external deductions. This is after you pay taxes, social contributions, etc.

If your consumption is below your income, you are living below your means. If it is higher, you are living above your means. This means that you have to borrow to finance your consumption habits.

In this regard, you have three factors to control if you want to leave below your means:

·     You can increase your income.

·     You can reduce your consumption.

·     You can increase your savings

These 10 secrets will helps you in taking care of all the three factors. You need not control one but all of them.

Secrets of living below your means

·     Have clear financial goals

·     Increase your income

·     Avoid the rat race

·     Budget

·     Pay yourself first

·     Cut unnecessary expenses

·     Negotiate your purchases

·     Live off one income

·     Do not follow the Joneses

·     Track your spending

1.  Have clear financial goals

This is the most important step to living below your means. You need to have clear financial goals.

Goals act as fuel for hard work. If you do not have clear goals, you will never have a reason to live below your means. Setting clear goals will enhance your financial discipline. This is important when implementing the other 9 tips to living below your means.

Characteristics of good financial goals

·     They are super-specific. They state exactly what you want to achieve.

·     Such goals must be measurable.

·     They must be achievable within a specific time frame.

·     They must be realistic.

·     They should be time-bound.

If you need more on this, learn the art of goal setting.

2.  Increase your income

If you want to have more left to invest, you can increase your net income. This proves to be a hard strategy for many but it works.

This is the best secret of living below your means. It means that you do not have to cut your expenses. You can keep your lifestyle but increase your net income.

How to increase your income:

·     Get a second job

·     Start a business

·     Grow your profits

·     Get a raise at your workplace

3.  Avoid the rat race

The rat race is a situation where your expenses always catch up with your increased income. This means that as you get more income, you also increase your expenses.

Many people get a raise at work and they move to a bigger house. This is the rat race. They are always finding ways of consuming everything they earn.

If you will live below your means, you have to avoid the rat race. Use the extra income to invest and not consume. This calls for financial discipline.