How to Start Living Below Your Means

8 steps to start living below your means and saving more money!



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Chapters

00:00 Start Here
00:35 Understand What Living Below Your Means…Means
01:40 Understand Why You Need to Live Below Your Means
02:36 Know How Much You Earn
03:55 Track Your Spending
04:50 Focus On Getting The Big Three Expenses Right
07:33 Focus On Lowering Your Other ‘Need’ Expenses
08:27 Start Building An Emergency Fund And Invest
09:45 Focus On Maximizing Value With Want Spending


The only way to have a good relationship with money is to live below your means or spend less than you earn. In this video, I am going to walk you through 8 steps that you need to take to start living below your means.

1. Understand What Living Below Your Means…Means

It is very important to understand exactly what living below your means, means. Many people think that living below your means means being cheap and penny pinching; however, this is not true. Living below your means simply means spending less than you earn and depending on how much you earn, this will look different.

2. Understand Why You Need to Live Below Your Means

No matter how much money you make, everyone needs to live below their means. And the reason for this is because when you start to spend more than you earn, you run into financial problems. It is vital that everyone spends less than they earn otherwise they will create problems in their financial life.

3. Know How Much You Earn

Now that we understand what living below your means is and why you need to do it, the first step to living below your means is to know how much money you make. This sounds very obvious; however, many people do not know how much they make. And that is because there are two types of income: "Gross Income," which is the money you make and "Net Income," which is the money you keep. It is important to base your budget and your spending off of your net income because that is the actual amount of money you make.

4. Track Your Spending

Once you know your net income, the next thing you need to do is track all of your spending on a spreadsheet so you know exactly where your money is going and if you are living above your means or below your means.

5. Focus On Getting The Big Three Expenses Right

When trying to lower your expenses, many people focus on cutting out small things like a cup of coffee; however, the truth is the majority of your budget goes to three expenses: housing, transportation, and food. When trying to live below your means, it is important to first focus on getting these three expenses right.

6. Focus On Lowering Your Other ‘Need’ Expenses

Once you have lowered your big three expenses, you next expense need to focus on your other smaller need expenses like insurance, utilities, and modern necessities. These expenses also consist of a big portion of your budget and so it's important to lower them as much as you can.

7. Start Building An Emergency Fund And Invest

Once you have lowered your other need expenses, before you start spending money on wants, it is important to establish a specific amount of money to set aside each month to save more an emergency fund and invest. This will allow you a financial cushion in case a surprise expense comes up.

8. Focus On Maximizing Value With Want Spending

Finally, once you have determined how much money you can set aside, for the rest of your money, you can use for things you want. It is important to spend money on non necessities in order to have a balance in your life; however, money can go very quickly and so it's important to focus on using your money to maximize value on everything you buy.

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