How to Tell If You Are Living Below Your Means
If you take the time to create a budget, you can quickly find out if you are living below your means.
Steps to Live Below Your Means
There are guidelines that you can follow to see if you are overspending in certain areas.
I follow Dave Ramsey’s philosophy: budget every dollar so you know where all your money is going.
When you create your budget, or if you have one already, check to see if your numbers fall within these guidelines:
- Charity/Giving: 10-15%
- Savings:Â 10-15%. This includes Retirement and College savings.
- Food expenses include Groceries and Restaurants and should fall between 5 and 15%.
- Clothing expenses: 2-7%. This includes clothing purchases as well as dry cleaning and laundry services.
- Housing expenses should be between 25 and 35%. Housing expenses include mortgage payments, real estate taxes, repairs, and homeowner association dues.
- Transportation costs for gas, oil, auto repairs, taxes, and registration fees should fall between 10 and 15%.
- Utilities: 5-10%. This covers expenses such as phone, gas, water, sewer, electric, mobile phone, cable, internet, and trash.
- Medical and Health expenses: 5-10%. Of course, this percentage can be adjusted depending on your needs.
- Insurance: 10-25%. This includes renters, homeowners, auto, disability, health, and life insurance.
- Recreation expenses, including vacation and entertainment, should fall between 5-10%.
- Personal expenses like personal spending money, hair care, babysitting, child support, alimony, and whatever you feel should go into this category should not exceed 10%.
- Debt payments should not exceed 10%. The ultimate goal is to have debt at 0%.
How did you do?
If you can keep your budgeted items within these ranges, you are living within or below your means.
If some of your categories are above the recommended guidelines, you now know which areas you need to concentrate on.
The goal is to ultimately have zero debt and reduce expenses in the other categories so you will be in a better position to give and save more.
Frequently Asked Questions
1. What does it mean to live below your means?
Living below your means simply means spending less money than you earn. Instead of using every dollar that comes into your household, you intentionally leave room in your budget for savings, investments, debt repayment, and future goals. It’s about making thoughtful choices so your money supports the life you want both now and in the future.
2. Can I still enjoy life if I live below my means?
Absolutely! Living below your means is not about eliminating all fun or never spending money. It’s about prioritizing what matters most to you. Many people find that they enjoy life more because they experience less financial stress, have money available for meaningful experiences, and feel more secure knowing they are prepared for unexpected expenses.
3. What’s the easiest way to start living below my means?
Start by tracking where your money is currently going. Review your bank and credit card statements and identify areas where you can reduce spending without sacrificing your quality of life. Small changes, such as eating out less often, canceling unused subscriptions, or shopping with a list, can free up money for savings or debt repayment. Even small adjustments can make a significant difference over time.
4. Why is living below my means so important?
Living below your means creates financial breathing room. It allows you to build an emergency fund, pay off debt faster, save for retirement, and pursue important goals without relying on credit cards or loans. The habit may take time to develop, but every step you take toward spending less than you earn strengthens your financial future and gives you greater peace of mind. The sooner you begin, the more opportunities you’ll create for yourself and your family.
Have you created a budget? How do you determine if you are living below your means?
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This is some advice I can use. Thanks!
Oh good! I’m glad you found it helpful!
Great post especially in a busy world with attractions to expenditure.
Thanks! I’m glad you liked it! 🙂
YAY! I am so happy to find a fellow Ramsey fan! Thanks for stopping by my little blog. I can’t wait to see what you are up to on yours! Have a wonderful weekend.
Not sure if the previous comment went through but thanks for visiting! Just got onto the DR train and am working on BS0 &1. Love how clear and concise this post is!
Very helpful! I hope I posted it correctly to my blog. I am preparing to write about money management next week. I am still not finished writing about tragedies, depression and set backs.
God bless you!
Thank you for your comment! I’m glad you found the post helpful 🙂
I don’t think you’ve given enough budget for savings or food expenses. I guess your budget should be tweaked, depending on where you live. Here in the UK you’d need less money for medical (which is provided by the state), but food costs are exorbitant. Still interesting article Thanks for bringing it to my attention.
I would definitely say that you are correct in the fact that each person should tweak their budget to meet their specific needs. I guess if you needed more money for certain categories, you could decrease the amount you spend in other areas to balance it out. The goal is to budget every dollar so you know where it’s going. Thanks for your comment!
Can’t live without the budget! Ours is in an spreadsheet so we can both access it. We track our expenses out 12 weeks, and on a separate tab, savings. The budget is also where we “fund” expenses like back-to-school needs, summer classes for child, holiday gifts. If you don’t have a written plan, it’s really hard to know where you stand.
I totally agree! Thanks for your comment.