Living within your means is trivial if you're a billionaire (or at least, it should be!) But what about the rest of us non-billionaires?
Spending less than you earn is one of the most important things you can do to become financially independent. There has to be more coming in than going out.
It's definitely easier to live within your means if you have a lot more money coming in. It's good raw material, and a great recipe, for having money left over.
Living within your means: The Billionaire Version
This article over at Curiosity.com got my attention because the thought of billionaires living within their means is a bit comical. It doesn't seem terribly difficult for Warren Buffett, Mark Zuckerberg, and Tim Cook to spend less than they earn, does it? These are three of the richest people in the world.
Instead, I would expect it would actually be difficult for them not to live within their means. A bit like Brewster's Millions on steroids.
Yet, Mark Zuckerberg lives in a 5000-square-foot five-bedroom house. Warren Buffett drives a used car and lives in the same modest house in Omaha, Nebraska, that he bought in 1958. (Berkshire Hathaway owns a real estate company. I suspect that he can get a good deal on commissions should he need to sell!) Tim Cook thinks different than the Joneses and lives in a downright frugal 2000-square-foot condo.
These houses would be reasonably extravagant for most of us, but for them, the cost is decimal dust.
Living within your means: The Non-Billionaire Version
That's all well and good for billionaires, but 99.9998% of people in the US are not billionaires. Most of us don't have the luxury or the choice of living in a house that amounts to 0.001% of their net worth.
At the end of the article, the author gives some pointers on how to live within your means even if you're not a billionaire. Here are the ones that the article gives, mixed in with a few others that we use:
- Take inventory of your expenses. Look at the big expenses as well as the little ones. Determine which ones are the most important as well as the ones that you can give in on. Eliminate the ones that no longer give you value.
- Budget your money for the month ahead. This means planning which you're going to spend money on before you spend it. We've been doing this regularly for about a year now, and it's helped our finances immensely. (Here's the pen-and-paper budget that we have been using, with free downloadable worksheets.)
- Make saving a regular, automatic habit. It's fairly easy to just set it and forget it. you can have money transferred into a savings account automatically each month. You can also go to your work's retirement program if it's available and set up deductions from your paycheck. If the money never hits your checking account it makes it a lot easier not to spend it.
- Reflect on all of the things that you already have. When you do that, it reduces the urge to get more. (No, really! It works!)
- Translate how much something costs into hours. For example, you might find that a new big screen television is 56 hours worth of work and that lunch out is 55 minutes worth of work. This helps you to reassess whether you actually want to spend the money. Or, another trick is to use a money analogy to put the cost into context. (Does it cost a paycheck or a pizza?)
- Start doing little money saving things, like packing your own lunch or brewing your own coffee. One of these things by itself may not do a whole lot, but doing this and other things will add up over time.
- Start up a side hustle. There are virtually limitless ways to earn extra money (here's seven that we've tried), and many of them don't need a whole lot of start-up money. It could be just as easy as going over to Fiverr and posting something there that you can do. This will bring in more money and make it easier to spend less than you earn.
