How to Live Beneath Your Means

piggy bank

 I’m going to jump right in there, and say budgeting is sexy. Well - perhaps not budgeting so much, but the ability to manage your finances, and therefore not end up where a date at the end of the month involves a shared pot noodle sat in front of the telly - is essential if you want thrive financially.

The key to managing your personal finances successfully, whatever your income level, is living beneath your means. It can seem daunting - even knowing precisely what money comes in and goes out of the bank account on a daily or weekly basis can be a challenge, but with some careful planning, self discipline and simple changes, it can be possible on even the lowest of budgets.

Step 1 - Have a plan

The first step to living beneath your means is knowing precisely what you have coming into your account - and what essentials absolutely must come out. Make yourself a budget using one of the templates and trackers available online for free, and the following tips. Write down every source of income you have over a month, including regular wages, any benefits you may be entitled to, or any support you get from other sources such as family. Only count the elements that are really reliable - or you could construct a whole budget around an inflated income, which is even worse than having no budgetary plan at all.

Once you know your income, write down all known outgoings - starting with the fixed, such as rent, bills, transport and tuition fees. Then think about the discretionary spending - entertainment for example, and food bills, in which your budget can be more flexible. Take the fixed outgoings away from your overall income first - and whatever you have left is your discretionary spend. Think about the most important items first, such as food and a modest budget for entertainment. Look for areas you could trim by switching - for example replacing a gym membership with jogging with friends, or cutting your satellite TV package in favour of re-watching the stack of DVDs gathering dust under the sofa.

Some advice suggests changing your spending habits to use predominantly cash, which you can physically divide into different ’pots’ at the start of the week. When the pot is empty, you cannot spend anything more on the particular category - meaning if the ’fun’ budget is blown on a Monday night, then there will be no more trips to the pub until the following week. You can achieve the same when managing your money through online banking. Simply setting out the reality of your financial life in black and white might be enough to show you where your spending might be out of control, or where savings could easily be made.

Step 2 - Know what motivates you

Having a budget is only useful if you are able to remain motivated to stick to it in the longer term. Set yourself goals, such as paying down student debt, or getting the cash together to allow you to survive without a regular job for a period of time whilst you start your own business. Make the goals real, by writing them down and sharing them as publicly as you dare. Stick a note of your goals, or images to remind you of them, around your home - for example on the inside of a kitchen cupboard, or as a phone wallpaper, to keep you motivated even when caught off guard.

Talk to those around you, friends and family, so that they know you are watching your finances - their support is essential for your success. Try swapping the odd night out for a night round at a friends’ house, or suggesting limiting birthday and Christmas present spend on each other - you might well find that others are very happy to agree!

Seek support outside your friendship group by reading and following any of the excellent personal finance websites and blogs. Many have real, tangible advice, written by people who have learned to live beneath their means the hard way.

Step 3 - Make small changes

Trying to change completely overnight is futile - you will quickly lose motivation and return to your old habits. Try instead, to make small changes which you can sustain and which add to make a big difference.

Look for ideas online which can help depending on your personal preference and skills. Home cooking, for example, can make a massive difference - shopping to a meal plan and learning to make some basic meals from scratch can save you hundreds of pounds. If cooking is not your strength then you might find alternative ways to save, using online cash back sites, or setting up a side hustle for some additional income. Whatever you decide to try, start small, track the impact you make, and then move progressively to bigger ideas as you get accustomed to the change.

Whether you’re a student living on a low income, or wanting to save cash for something specific, like starting a new business or buying a first home, being able to live below your means is vitally important. The most difficult thing in doing so is often making the first step to draw up a budget and make small changes, but with a little motivation and discipline, these small changes can very quickly become a way of life, and help you successfully manage your finances, whatever your income.