4. Budget

Budgeting is a crucial part of financial planning. It is the process of allocating income to needs, wants, and savings.

There is a famous 50:30:20 rule.

·     Spend 50% on needs

·     30% on wants

·     20% as savings for investment purposes

This is the least any serious person can do. Successful people save up to 70% of their income.

Having a budget and sticking to it, come rain or sunshine, is a step in the right direction.

5.  Pay yourself first

If you will live below your means, you have to pay yourself first. This means saving/ investing before consuming. You do not invest what is left after consuming; you consume what is left after saving.

This is what successful people do. It shows that your priority is investing and not consuming. People who save whatever is left after consuming rarely have enough to save.

Learn more about how to pay yourself first.

6. Cut unnecessary expenses

Must I buy this? This is an important question if you want to live below your means. Asking that question and answering it honestly is invaluable to your personal finance goals.

If the answer to the question is yes, you can go ahead and make the purchase. If the answer is no, do not make the purchase.

If what you a purchasing is not a necessity at that time, defer the purchase. Only spend on what is necessary; what you cannot live without.

This calls for delayed gratification and frugality. If you can cut all meaningless expenses, you can have enough left to save and invest.

7. Negotiate

Even if you have to purchase a commodity, you do necessarily have to purchase it at its stated asking price. You can always negotiate.

Many sellers will always state an asking price that is higher than what they are willing to receive for a product. This is more than a product is worth.

As a buyer, your goal is to buy something below its actual value. This is how you create value for yourself.

Negotiating is not a sign of lack or weakness, it is a sign of financial awareness and understanding.

I recommend you read Never Split the Difference by Chris Voss of black swan limited. I will give the link in the further reading section of this post.

8. Live off one income

If you have 2 sources of income, you can decide to spend one and save the other. This is crucial when it comes to living below your means.

Having multiple sources of income (MSI) is not an option for those who desire financial abundance. You need to have several of them.

You can then allocate different uses to different incomes. For example, you can consume income from your job and save the one from your business.

As a family, you can decide to spend the salary of one spouse and save income from the other. This will help you live below your means.

9.  Do not follow the Joneses

Never adopt a lifestyle just because somebody else or a certain group of people has adopted it. Let your lifestyle be determined by your income and your financial goals.

Many people borrow to buy a bigger car just because all the colleagues at work are doing it. This big car, whose purchase was more emotional than logical, will kill your financial life.

Be yourself at all times. Looking poor does not mean that you are poor. If you want to have financial success, be ready to look poor for a while.

By not buying what other people are buying now, you will be able to afford in future everything they cannot.

10. Track your spending

As the saying goes, what can be measured can be improved. You must be able to track and measure your spending levels to be able to control and improve them.

Track and record everything you purchase and at what price. At the end of the month, compile it against your income. If you are consuming more than 80% of your income, you are in financial danger.

You can then repeat the process of living below your means and keep tracking. After tracking, keep measuring, and improving.

Conclusion

There you go. Here are the 10 secrets to living below your means. The goal is to keep increasing your income and your savings. You can increase your savings by decreasing your consumption.

It is a guarantee that if you live below your means and invest what is left, you will get financial freedom sooner than later.

You owe yourself and your family a good life. This good life will not come by giving them everything they ask for now but by sacrificing now to afford a lot more in the future. Live below your means.