Living Below Your Means: What That Means and Why It’s Important

living below your meansLiving below your means.

What even does that mean? We’ll get to that in a moment, but first, a story.

It’s a story I’ve told a lot, both in real life as well as here on Mostly Mindful. 

It’s a good story though, one that bears repeating.

When I got my first job, my Nana —who lived like a queen on her meagre government pension— sat me down and offered me some financial advice. 

She told me to divide my take home pay into three. A third was to be allocated to savings and a third to living expenses. The remaining third, she said, was for spending.

The message was clear: live within your means.

I smiled politely and promptly disregarded everything she told me. I went into overdraft on my brand new cheque account and spent every available cent on my shiny new credit card.

Go me!

Let me tell you, withdrawing cash with your hand over your eyes isn’t fun. You need to know how money you have available. Or, as was the case for me, how much money you don’t have available.

Maybe you’re in a similar position at the moment? If you are, the first thing you need to know is that your situation might be dire right now, but it doesn’t have to stay like that.

For reasons of her own, Sporty’s finances were also in a shambles. Not surprisingly, we brought our poor money management skills into our relationship.

It took us a number of years to get our spending habits in check and finally stop living paycheck to paycheck and become debt-free. It wasn’t easy, but it was definitely worth the effort.

We went from being permanently stressed about our finances to not having a care in the world. We’re still a long way from being financially independent, but for now being debt-free is enough.

We’re still actively working towards increasing our net worth, so that we can eventually stop working because we have to. But, we still feel super happy with how far we’ve come.

Wherever you are on your own financial journey, figuring out how to stick to a budget and avoid overspending is an important first step. 

Obviously the earlier you start, the better off you’ll be. The quote below could just as easily apply to money and finances.

The best time to plant a tree was 20 years ago. The second best time is now. —Chinese Proverb

Why You Should Live Below Your Means

Why Is It Important to Live Within Your Means?

First, let’s look at why it’s so important to live within your means. 

If debt is a hole, solid ground is money in the bank. That only way to achieve that is by following my Nana’s advice. Don’t spend money you don’t have and put something aside each month for those rainy days.

Living below your means isn’t always fun. At least, it won’t be in the beginning when you’re earning a small wage. Your friends are going to the movies and buying fancy coffee, while you’re at home not spending your money.

On the upside, your savings account is growing fatter each month, while theirs…oh wait, they don’t even have a saving account. 

At some point you’ll be faced with an unexpected bill. Your car might break down or you could end up in the emergency room for whatever reason.

You can dip into your emergency fund to pay what’s owed. Your friends, on the other hand, will have to get a second job or go into credit card debt to foot the bill. 

The Benefits of Living Debt-Free

benefits of living debt-free

Living a debt-free lifestyle has numerous benefits. You sleep better when you don’t have financial worries keeping you up at night. You can save at a faster rate. Plus, it makes changing careers more doable.

There’s something to be said for financial freedom, that’s for sure.

When you get paid you know the money is yours to do with as you please. You don’t have anyone threatening to confiscate your new car in lieu of the outstanding debt.

When you save up to buy something instead of going into debt, you also avoid the often astronomical interest fees that lending institutions charge for the pleasure of spending money that belongs to them.

Banks will often pose strawman arguments to persuade you take out a loan. They’ll tell you that you need to have debt to have a good credit score.

That’s a moot point, since you don’t need a good credit score if you don’t want debt in the first place. I get that this is overly simplistic. At some point you may want to buy a house, for example.

For Sporty and I, being financially secure first (i.e. having rainy day savings, investing in our retirement, keeping our credit card balance in the black, etc.) is more important.

Once you’ve checked all of those boxes, then you can start thinking about taking out a mortgage to buy your own home. Until such time, don’t worry about your credit score.

How Easy Is It to Live Within Your Means?

How Easy Is It to Live Within Your Means?

I’m not under any illusion that this is an easy path to follow. Especially if you’re already in debt. The world is a vastly different place than it was in my Nana’s days. Rents are higher, food costs more and salaries haven’t increased proportionally. 

Telling you to save a third of your income may seem laughable. (You may even be rolling your eyes at the screen.) The point is, however difficult or challenging it may seem to live within your budget constraints, you must at least try.

Throwing your hands in the air or worse, applying for yet another credit card, will only sink you deeper into that hole. The sooner you face facts and start making plans to fix your finances, the sooner you’ll be on the road to financial freedom.

How to Live on a Budget (And Stop Overspending)

How to Live on a Budget And Stop Overspending

When you pretend nothing is wrong (Sporty and I used this approach for ages!), ripping off the band aid can be terrifying. You literally have no idea what state your finances are in.

On the flipside, it’s also a huge relief once you finally know the state of things. It might be worse than you anticipated, but it might not be. Either way, knowing is better than being in the dark.

If you have the means, hiring a financial advisor to help you is great. This is the route Sporty and I took and to this day we credit Ian the bean counter for helping us achieve our financial goals.

That said, you may not be able to afford to hire an expert to teach you how to save money instead of blowing it on everything except your overdue credit card bill. 

That’s fine. It’s 2020 and everything you need to know can be found online. The trick, of course, is separating the wheat from the chaff. Or, as can sometimes be the case, discerning the charlatans from the real deal.

When it comes to budgeting and finance management, I always recommend Dave Ramsay. He’s so well-known you can type ‘dave finance guy’ into Google and he’ll be at the top of the page.

Dave has a bunch of tools and resources on his website (paid and free). Along with a guide to budgeting, he has a budget app, an investment calculator and more. There’s also a 3-minute assessment that will help you figure out where you need to start.

Tracking your spending with a budget calculator makes living on a budget much easier. We humans have a tendency to over- and underestimate in the wrong areas.

For example, we’ll think we have more money in the bank than we do. Or, we’ll assume we haven’t spent nearly as much on takeout lunches as we actually have.

Sporty and I use a spreadsheet to track our money. We’ve made it available on Google Drive for fellow Excel geeks. Whether you choose to go our route or use an app doesn’t matter. The important thing is that you track your spending.

Keep Your Spending in Check With These Frugal Living Tips

Frugal living often gets a bad rap. People assume it means you have to be cheap, as opposed to live cheaply. There’s a difference.

Being frugal means you’re smart about your money. You don’t buy things you don’t need or can’t afford. When you’re cheap, you refuse to spend money on anything, even when you really need it.

Frugality is something that makes good money sense. Watch the video above for tips on ways to be frugal without being cheap. Josh has some great advice for saving money.

One of our favourite frugal activities is taking advantage of loyalty schemes. You can earn money to spend in-store simply by swiping a card (or scanning an app).

I mean, why wouldn’t you do that?

We’ve made a huge amount of money over the years by taking advantage of customer loyalty schemes. Some pay quite a bit, others not so much. It doesn’t really matter since it costs us nothing.

The Diderot Effect: How One Purchase Leads to Another

Have you heard of the Diderot Effect? Essentially, it’s something we humans do without even realising it. Often, buying something new, say a pair of shoes, leads us to purchase a second item. A belt, for example.

If you’re lucky, that’s where it stops. However, more often than not, it spirals into a shopping fiasco. Before you know it, you have a whole new wardrobe. One you definitely didn’t need.

Reading the explanation, you’d be forgiven for thinking this is a new phenomenon. Nope. The famous French philosopher Denis Diderot first noticed the tendency to make reactive purchases in 1765.

Sorry, there’s no blaming Google’s advertising algorithms for this one. You’ll need to ask someone who studies human behaviour if you want to understand why we’re inclined to head down this buying rabbit hole.

It might prove interesting, but for the sake of your finances a better question to ask is: How do I overcome the consumption tendency?

Joshua Becker explains how to do that in the video above. Habit maestro James Clear also does a great job of unpacking why we want things we don’t need.

Watch, read and learn. Mastering this tendency will ensure you keep your money where it belongs: in your bank account.

Finance and Money Books Worth Reading (More Than Once)

Finance and Money Books Worth Reading

While being in a financial pickle can be anywhere from not fun to downright unpleasant, the good news is that you’re not the first person to find yourself in this position.

Countless people around the globe have found themselves in the Debt Hall of Shame. This has prompted a huge range of books on the topic. Because, clearly we need someone to teach us how to manage our money better.

Amazon turns up more than 10,000 results if you do a search for money management books. That’s just going to overwhelm you. And if you’re anything like me, a state of overwhelm is guaranteed to make you shut your laptop and do nothing.

I’ve listed a handful of finance and money books that we’ve either read or had recommended to us. Go through them and see if any grab you. We all take on information in different ways, so it’s important to find an author you resonate with.

Your Money or Your Life by Vicki Robin

First published in 1992, Your Money or Your Life is one of the books you’ll find featured anytime someone sees fit to compile a financial self-help listicle (like this one).

Touted as one of the most influential books ever written on personal finance, the book provides a 9-step plan to transform your relationship with money and achieve financial independence.

Secrets of the Millionaire Mind by T. Harv Eker

Secrets of the Millionaire Mind is one of the first books Sporty and I read when we embarked on our mission to improve our finances. An easy, almost conversational read, the book starts off by explaining how your money blueprint works.

From there, T. Harv elaborates on the seventeen ‘wealth files’ that separate the average Joes from the well off. He explains how rich people think and act differently from poor and middle class folks and provides action steps to follow in their footsteps.

The Choose Yourself Guide to Wealth by James Altucher 

The sequel to Choose Yourself!, The Choose Yourself Guide to Wealth is James’ attempt to shake us free from old thinking. He doesn’t pull his punches, so if you prefer kid gloves this book might not be for you.

Personally, I love his approach to life. James tells it like it is, but not to be argumentative. He just doesn’t see the point of avoiding an issue just because it’s something we’d rather not talk about.

Keenly observant of the world around him, James dives deep on matters the rest of us either prefer to avoid or don’t notice in the first place. I highly recommend his books.

He has some newsletters you can subscribe to via his website, but those are way too frequent for my liking. Stick with his Idea List on LinkedIn and if you have the time, listen to this conversation he had with Rich Roll a little while ago. 

How to Retire Early by Robert Charlton

A book on retiring early is best written by someone who has actually retired early. In December 2006, at the age of 43, Robert Charlton and his wife retired from their jobs to travel the world and live life more fully. You can read about their adventures on their blog Where We Be.

If you’re looking for overnight success, this book isn’t for you. Instead, Robert provides a detailed look at the roadmap he and his wife followed to get them from full-time work to financial independence in less than 15 years. 

Sporty and I learnt a lot about investing and figuring out how much money we’d need to save in order to live fairly comfortably when we stop working. We’re still a way off, but now at least we have a clear idea of what it will take to get where we want to be.

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler

Nudge takes us up close and personal with our often poor decision making skills. It teaches us to look more closely at why we make the decisions we make and more importantly, how to make better ones in the future.

Unless we get a handle on why we do the things we do (like spend money we don’t have on things we don’t need), all the money management know-how in the world won’t save us from our desire for more.

What’s Next on Your Financial Journey

Financial Journey

Take the time to fully understand the state of your finances. Rip the bandaid off once and for all. You’ll feel better for it, I swear.

Remind yourself that your financial future is on the line.

Take Dave Ramsay’s 3-minute assessment. Perform an in-depth financial audit so that you know exactly what you’re dealing with.

It may sound intimidating, but all it essentially means is that you write down how much money you have coming into your bank account, how much is leaving it and how much debt you have.

Create a budget that works for you and stick to it no matter what. If your friends want you to come out for pizza and your budget doesn’t allow for the expense, decline the invitation.

Better yet, invite them for a potluck at your house. In South Africa we call this a bring ‘n braai. Everyone brings food and booze and the host provides crockery, cutlery, and a fire. This way, you can control how much you spend and you don’t miss out on social time with your mates.


Make a commitment to yourself that starting now, you’ll live within your means. No more spending money on stuff you don’t need. No more eating out and picking up coffee at Starbucks.

You can do this. Trust me, if Sporty and I could fix our mess, you can fix yours too!

Knowing is not enough; we must apply. Willing is not enough; we must do. —Johann Wolfgang von Goethe

Photos by Jude BeckDerek StoryDESIGNECOLOGISTSam Dan Truong, Frankie CordobaClay Banks and Chris Lawton on Unsplash