Frugal Living: How Do You Actually Live Within Your Means?

Here’s the drill: ask any personal finance guru about how you can easily achieve financial freedom, and there’s no doubt that the phrase “you have to live within or below your means” will come into play – absolutely, definitely, no frickin’ doubt about it. Heck, it’s been brought up too many times already that it’s beginning to sound much like a cliché rather than an advice that needs to be taken seriously.

And to make matters worse, most people have learned to ‘somewhat automatically’ respond to it in the even most clichéd way possible: “It’s easier said than done.”

And this, my friends, is THE END OF IT for most people hearing about this decades old financial advice. You know, people just shrug it off and move on with their lives without actually considering this piece of advice. And then regret not having taken it seriously in the future.

But what does “living below your means” exactly mean? And why do we need to practice this in our financial habits, anyway? Well, here’s my opinion/rant about this topic so I need you to carefully read this through.

To live within your means is to spend only what you can afford and to cut your expenses so you still have money left at the end of each month.

You have two options here: option one is to live within your means, and the other is to live waaay below your means. Any of the two is perfectly fine but if you’re a cold hard cheapskate (like me sometimes), you can go all the way (the second option) which I recommend you try at one point in your life.

Another goal of this would be to avoid accumulating debt and increase our net value as a result of continuously living within your means.

That means you (yes you) should identify how much you are actually taking home, take away a chunk of it towards your savings (and for investments, too) and make use of what’s left towards your expenses.

How ‘frugal-er’ can you go?

It’s a simple math, really:

your monthly income (minus) a chunk for your savings (equals) the money you can use towards your expenses

How much of your money is really yours?

The first part of the equation requires you to identify how much of your income you are actually taking home. Your gross income might actually a good number to start with in this formula, but unfortunately you have to deduct all the taxes and other “miscellaneous” write-offs from your gross income to find out how much of it you can work with in this equation.

Being able to identify how much of that money is really yours is a good way to get a good look at how you are doing financially and also the opportunities that you can explore with it.

Deduct a significant amount of your money towards savings (and possible investments)

Notice the ‘chunk for your savings’ in the middle of the equation? I threw it in there because it will save you in the future (you’ll thank yourself, promise) – will act as your buffer for those rainy days when you need emergency cash, or worse, lost your job. If you don’t have this ‘chunk’ in your equation and this emergency thing happens, you’ll be withdrawing your investments prematurely, or if your balance is zero, there’s a clear chance you’ll be taking out a loan and ending in debt which clearly isn’t the goal of ‘living below one’s means.

Another thing – if you take away this ‘chunk of savings’ from the equation, doesn’t that mean you’ll only end up with the equation of ‘your monthly income (equals) the money you can use towards your expenses’? And if this is what you understand of ‘living below one’s means’, doesn’t this mean you’ll only be living paycheck after paycheck, not being able to wait any longer for the next pay day? You don’t want to get stuck in the rat race, do ‘ya?

How much of your income should you dedicate towards savings? A good start would be to take at least 20% of it. But if you can, it won’t hurt to go way higher.

Work with what’s left towards your expenses

The last part of the equation that equals out ‘the money you can use towards expenses’ – it meant you have to make use of what’s left of your income after taking out a significant amount of it (a chunk of it) towards your happy little savings account.

Now some of you might have a violent reaction towards this – I mean, we all have responsibilities after all, and might need more for expenses than whatever is left – but I don’t care. If your income doesn’t allow you to have a wiggle room for the little luxuries after taking out a chunk for your savings, then you must not feel entitled to it at all. It’s either you accept and suck it in, or switch to a higher paying job or business and work your ass off first. I don’t mean to be harsh guys, but I know it’s a very (if not the most) important form of discipline that we all have to get used to.

This guys, is what’s living within your means mean. Always remember this and stick to the simple equation above, and coupled with discipline and acceptance, you’ll eventually get used to this new financial habit which you’ll be glad you did sooner than later.

‘What for?’ you might ask. ‘I mean, with all those expenses and responsibilities, it can get quite hard to actually live within my means, right?’

WRONG. The answer here is to choose your battle.

Yes it can get really tough sticking to those expenses and responsibilities, but this is the perfect time to ask yourself: “Is this expense really necessary?” or “Do I really need a brand new latest edition car that I will be working my ass for in the years to come, and then horribly find out later on that it has already depreciated in value?”

Just recently I had this chat with a former colleague who was ranting about how he could barely manage to make ends meet, let alone at least pay off a bit of his debt in each paycheck. He goes on and on about his expenses, and how his money doesn’t stay too long in his account just after each payday.

After mentioning that his major pain is the gas, parking fees, and insurance on top of his monthly car loan payment, I knew right at that moment where the problem is: he bought something he did not have the money or means to cover for this expense, and that he had to live like on instant noodles for the next five years or so and kiss his manager’s ass just so he isn’t on the bottom of the food chain when the company decides to let go of people. And he knew it right from the start.

He then asks me why I don’t always look forward to the payday, and how I manage to have a financial “wiggle room” to do exactly what I love doing and take risks in business and in investing.

Me: “Because I live a frugal lifestyle and I don’t buy unnecessary stuff that won’t really matter to me. Heck, I don’t even have a car and I must admit I do struggle in my daily commute and I effing hate it – but this is the battle I choose because my priority is financial stability.”

Him: “But… you need to buy a car for comfort…”

Me: “It’s always more comfortable when you know you have money.”

long silence followed

If this is more or less very like your case, then reason out to my face that it’ll be very hard for you to actually live within your means. Do not let your current responsibilities become a convenient excuse to not have to live within your means.

Of course, people make mistakes (and it’s normal), but I hope my buddy and also yourself get to learn a great deal from your experience.

I mean, doesn’t it feel AWESOME to not have to line up to a long queue at the ATM on a payday, knowing you still have cash unspent? And doesn’t it feel great when you get to take the time to do business and do whatever it is that you want when you want it, knowing that you don’t depend on your employer and that you don’t have to work your ass off ’til the next payday? Great to have choices than no choice at all, right?

Having read all of this, I hope you give new meaning and importance to this golden rule, which is “to live within your means”. I hope your response wouldn’t be “it’s easier said than done”, but instead, “let’s do this thing!” Consistently do this and you’ll reap the benefits of this important-but-not-taken-seriously kind of financial lifestyle in the future. And yes, you’re welcome.


Stay awesome,


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