Many Americans don’t want to, but those who do are beginning to see progress in their savings and spending goals when they do.
According to the latest America Saves Week survey, about 40%of respondents indicated they were making positive progress on their savings needs. Those who said they were spending less than their income – in other words, living below their means – grew from 68% in 2014 to 71% last year.
More than half said they were saving 5% or more of their income, a 5-point increase over 2014.
As many people undoubtedly know, making the transition to living outside of your means to living within your means or even below them is difficult. Saving and spending patterns are often deeply ingrained in a person’s habits, and these are hard to break. However, those who manage to do so reap the benefits later on, when they are able to buy that home they’ve always wanted or can comfortably and confidently retire, knowing their financial needs will be taken care of.
Why You Should Live Below Your Means
When you live within your means, you spend roughly the same amount that you make. That means you are paying off debt and aren’t creating any more, but it also means that you aren’t putting money into any kind of savings, either.
While abstaining from creating any more debt is certainly a positive thing, especially for those who have been working toward paying some down, there is still room for improvement. By putting money into savings, you are creating a nest egg that will help you out financially should something unexpected come up, like a job loss or a medical emergency.
Necessity isn’t the only reason to work toward living below your means, though.
According to Retired By 40, being able to put away money can relieve stress and give a person something to be proud of. This is because you know that, in case something does happen, you have a safety net to fall back on.
Plus, knowing that you have wealth accumulating in a savings account, retirement plan or an investment can give you confidence in your future.
How To Live Below Your Means
To start living below your means, there are probably some spending habits that you will need to break.
You may even have to adjust parts of your current lifestyle. According to U.S. News & World Report, there are many ways to do this without making drastic changes.
You may opt to negotiate for better rates for some of your monthly payments, like cable or insurance. Oftentimes, shopping for a new insurance plan can save you money. Or you can choose to do away with one payment, like cable, and replace it with something more affordable, like a Hulu or Netflix streaming account.
The Simple Dollar writer Trent Hamm echoed this notion and challenged people to stop spending money on something they don’t need but pay for anyway, like eating at restaurants. Instead of going to new restaurants regularly, begin cooking meals you’ve never tried before.
Or, rather than buying new books, get a library card.
Instead of buying a new video game, focus on the ones you have. If you find you don’t use them or don’t like them, sell them for some extra cash.
If you are already living within your means and not above them, another strategy to help saving is to keep spending even or reduce it, even when you get a raise or a bonus.
Direct this extra income directly to savings.
If this was not money you were counting on, it is money you don’t need right now. Putting it away won’t change your life today, but it will make a difference further down the road.
These small changes might be just what you need to begin saving some of your income for your future. However, Mint.com blogger Matthew Amster-Burton noted that living below your means isn’t always as simple as cutting out cable or coffee.
Sometimes, it takes a real lifestyle adjustment to begin forming a nest egg. The secret, he explained, is to not try to keep up with how your peers are living. Maybe your colleagues or friends drive nice cars or live in big homes. But the truth is, paying for an expensive mortgage while you are trying to save money might not be feasible.
If this is the case, you may need to rethink your current lifestyle and consider downsizing. Trade your car in for a used, but reliable, one or downsize your living arrangement for a smaller home or mortgage, or even an apartment.
While all of this might be hard to do at first or overwhelming, you will find that the trade-off and payoff in the end is well worth it.