How to Live Below Your Means

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The only way to stop stressing over your finances is to spend less than you make. With the right attitude, a little budgeting, and these tips, anyone can do it.

Step 1: Make a list
Keep track of everything you spend for a month, then compare that total to your monthly income. If the money going out is higher than the amount coming in, figure out what expenses you can reduce or, better still, eliminate altogether.

Step 2: Downsize
Take a look at the big, fixed expenses in your budget and see what you can downsize. You can't live below your means if you are paying for a home and car (or cars) you can't afford.

Step 3: Cut up your credit cards
Cut up all your credit cards -- except for one that you tuck away for emergencies -- and start using cash. Cash customers spend 30 percent less on shopping trips than customers who charge their purchases.

Tip
If you're prone to losing track of your bank balance, stay away from debit cards; many charge exorbitant overdraft fees.

Step 4: Don't buy what you don't need
Before buying anything, ask yourself: Do I really need this? Or do I just want it? If you don't need it, don't buy it. If you're not sure, think about it for a few days.

Step 5: Learn to cook
Learn to cook meals from scratch; you can save a bundle just by crossing convenience foods off your shopping list. People who give up restaurants and takeout food to live below their means don't waste money on prepared foods.

Step 6: Ignore raises
When you get a raise, have the extra money go straight to a savings account or retirement fund. It's one of the easiest, fastest routes to living below your means. And, contrary to what you might think, you'll never miss it.

Did You Know?
In 2006, the average American spent $101 for every $100 of their take-home pay.