Living below your means

From Bogleheads

Living below your means is a way to be mindful of how you spend your money. It means that you should try to spend less than you earn. In other words, you should have money left over at the end of the month. You can use this left over money to build an emergency fund, and then as savings to invest. If you do this correctly, you will still have the things you really need to be happy.

Establishing a household budget is an important step in living below your means as it provides visibility on income and expenses.

But living below your means means more than just balancing your budget. It is important to know the difference between what you need and what you want.

You can find a lot of good advice on the internet. For instance the wikiHow article "How to Live Within Your Means" discusses ways to build a balanced budget, and offers a perspective on spending and reducing your expenses.[1]

Maintaining a balanced budget

People establish a household budget to understand their cash flow - how much they make, and how much they spend. A budget can help you plan for purchases and establish savings to reach your financial goals. Budgets are often essential for people who want to keep spending under control.

The Bogleheads approach to developing a workable financial plan is to have a sensible household budget - one that provides for needed expenditures, discretionary pleasures, savings for big ticket items, and savings for long term retirement planning.

Some example action points from the wikiHow site[1] and others:

  • Create a list of essential spending. Record all of your expenditures, both fixed and flexible
  • Record or estimate your income from all sources
  • Compare your income to your expenditures
  • Evaluate your expenditures, and challenge them: "Watch the pennies and the dollars will look after themselves."
  • Boost your income where possible
  • Set yourself saving goals and stick to them: Save and invest a percentage of every paycheck, not just what is left after expenses. Start saving early.
  • Avoid credit and loans. Avoid paying non-deductible interest on anything other than your home mortgage

Adjusting your perspective on spending

Some example action points from the wikiHow site[1] and others:

  • Distinguish between what you want and what you need
  • Do not try to "keep up with the Joneses"
  • Change your definition of what it means to be "rich"
  • Know that spending less money will not decrease your quality of life
  • Be grateful for what you do have

Reducing expenses

Perhaps the most important idea underlying the Bogleheads® investment philosophy is recognizing you need to save a significant portion of income every month to have enough money for a comfortable retirement. There is no substitute for spending less than you earn. Reduce expenses and unneeded debt so you can consistently set aside a portion of earnings for decades. If you do not save enough, no amount of financial trickery will provide the returns you need for a comfortable retirement.

Some example action points from the wikiHow site[1] and others:

  • Eat at home whenever you can
  • Entertain at home instead of going out
  • Cancel any subscriptions you no longer need
  • Borrow items whenever you can
  • Wait for sales
  • Do not ever shop without a list
  • Pay "cash" for your purchases, avoid credit. Pay off your credit cards monthly.
  • Wait 48 hours before making a big purchase

See also


  1. 1.0 1.1 1.2 1.3 Samantha Gorelick (October 26, 2021). "How to Live Within Your Means". wikiHow. Retrieved August 15, 2023.