Learn to Live Below Your Means With These 5 Tips

profile Current Team  |  June 30, 2022

Living below your means doesn’t have to mean going without. You can live well and live below your means by being intentional with where your money is going and always considering the question of “need” versus “want” before buying something.

Here are a few tips to help you get started living below your means, so you can make faster progress in your financial journey while making sure you’re safe, healthy, and happy.

1. Opt for a Cozy Home

You shouldn’t spend more of your income on your housing than needed.

Choosing a 2-bedroom apartment with a view just because the landlord agrees to give you a lease when you only need a studio or 1-bedroom is only going to force you to stay in your current financial situation for months, if not years, longer.

Your living expenses are the biggest bill you pay each month. If you’re serious about paying off debt or saving up for a big expense, it’s better to live below your means by finding a safe, cozy, and comfortable studio or apartment that saves you money each month.

Similarly, if you are looking to move, consider what is necessary for your family — safe neighborhood, good school districts, and not too long of a commute — rather than things like extra bedrooms and landscaping or a big backyard, which may be nice but not necessary. Remember that when you choose a more expensive living situation, other costs go up as well. Larger apartments cost more to heat and cool and require more time and supplies to clean.

Traditionally, it has been recommended that you cap your rent payment at 30% of your income. If you make less than $40,000 a year, that means spending no more than $1,000 a month on rent.

However, others suggest that it’s better to consider your rent payment in conjunction with other costs, spending about half your net income on all your living expenses combined, including rent, utilities, food, health insurance, and your debt payments. This is called the 50/30/20 rule, with 50% of your net income going to those essentials, 20% going to savings, and 30% going to “wants.” Today, those “wants” will likely include paying off debt, but when those debts are paid off, that money will be available for having a little fun.

If you make $40,000 a year, you have a tax rate of about 12% depending on your withholdings. You will likely have about $36,000 available after taxes, depending on how much you pay in state tax, giving you about $3,000 a month, $1,500 of which would be spent on all those items. By those calculations, $1,000 a month for rent is now too high and will need to be much lower if you are intent on living not just at the recommended level but below your means.

Keeping your biggest expense small can give you a bit more wiggle room in your budget that will help you pay off debt or save money faster. It will also ensure that you have the cash flow you need to handle unexpected emergencies.

2. Seek Out a Solid Used Car

Americans are obsessed with cars. Buying an expensive car is one of the most costly choices you can make.

Some experts recommend that your car payment should equal no more than 10% of your income, and all car-related costs — like car insurance, gas, repairs, and the car payment — should total no more than 20% of your income. If we look at the 50/30/20 rule, we see that keeping that car payment as low as possible, or nonexistent, is a necessity when you’re living below your means.

This means that buying an affordable used car for cash or keeping the payments as low as possible with a goal of paying off the car quickly is essential.

New cars lose between 9% and 11% of their value the moment you drive them off the lot, and all cars lose value over time. They are not an investment. If your focus is on bettering your life, the best thing you can do for yourself and your budget is to find a reliable, inexpensive vehicle.

3. Entertain Yourself Simply

Entertainment expenses are some of the first things to cut when you’re aiming to live beneath your means. No big trips, days at amusement parks, or salon visits are in the budget for now.

This doesn’t mean that you have to sit at home and stare at the wall, however. Instead, you can entertain yourself inexpensively by trying these things:

  • Borrow books from the library.
  • Take courses through free online course sites.
  • Take free fitness classes on YouTube or free fitness apps like FitOn.
  • Go for walks or bike rides in local parks or outdoor areas.
  • Volunteer at a local animal shelter.
  • Play Sudoku, do crosswords, or play mahjong for free online.
  • Upcycle things in your home you don’t want.
  • Learn a new language.
  • Clean out your closets and reorganize your space in a new, fun way.

4. Eat at Home

One of the biggest fluctuating expenses each month is food. And it’s also one of the bills that you can’t cut out (like entertainment), but you do have total control over the final tally.

The biggest ways to cut costs is to stop eating out — no fast food, no dinners at restaurants with friends, and no coffee stops on the way to or from work. Make yourself lunch to bring to work, bring snacks in case you get hungry while you’re out, and take a full water bottle everywhere you go. This will ensure that you are never caught off guard and in need of something to eat or drink while you are out.

Eating at home can be a great way to get healthy as well. Fresh foods give you more energy than expensive processed ones, and you can experiment with cooking with a focus on budgeting and health.

When you feel better and you’re making healthier choices about how you take care of yourself physically, it quickly translates into making more positive choices for yourself in general — like continuing to live beneath your means even when you’re tempted to splurge.

You can make healthy food choices on a small budget by doing these:

  • Plan out meals, create a grocery list, and stick to your list.
  • Choose foods that are in season — they’re healthier and less expensive.
  • Avoid processed or pre-made frozen meals as they are more expensive and full of preservatives.
  • Use coupons.
  • Buy in bulk when it means that it costs less overall, but double check the math. Larger bags are not always less expensive. Only buy them if you’re prepared to use everything before it goes bad.
  • Cook large portions of food and then pre-portion it into containers. Freeze what you won’t eat right away, so you always have a healthy choice available.

5. Don’t Buy Anything New

Cutting out entertainment and eating out doesn’t mean that it’s time to turn to shopping to fill the time. To focus on living beneath your means, you can challenge yourself to buy nothing new for an entire year. This is a fun challenge that people like to do together.

This means buying nothing new for your home — no new clothes, no car accessories, no new electronics, and no new gadgets. However, you can and should buy new underwear, socks, shampoo and other soaps, cleaners, and consumables as needed.

Commit to Living Below Your Means With Current

Current has a number of financial solutions to help you stay committed to living beneath your means, including access to Saving Pods that allow you to earn 4.00% APY and grow your money faster.

Signing up for Current takes less than 2 minutes, find out more about the tools we provide to assist you in reaching your financial goals.


What Percent of Income Should Go to Rent? The 50/30/20 Rule as a Guide. (September 2020). Clearly.

Here's How to Find Your Federal Tax Bracket and Use It to Estimate What You'll Owe for 2021 and 2022. (December 2021). Business Insider.

How Much Tax Is on $40,000? eTax.

Car Depreciation: How Much Is Your Car Worth? (September 2021). Dave Ramsey.

68 Mostly Free Ways to Entertain Yourself at Home. (February 2020). PopSugar.

19 Clever Ways to Eat Healthy on a Tight Budget. (May 2021) Healthline.

The Ultimate Guide to a No Buy Year. (October 2020). Forbes.

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