Smart SpendingSmart Spending

10 tips to live within your means -- painlessly

Got more month than money or know someone who does? Here are some tips to make it work, without feeling deprived in the process.

By MSN Money Partner Aug 9, 2013 1:02PM

This post comes from Angela Colley at partner site Money Talks News. have a love affair with credit cards. According to the latest Federal Reserve figures, we have $853 billion in credit card debt.

As a nation, we love to shop, but sometimes that consumerism leads to debt and monthly financial struggles. If you're having trouble living within your means and staying out of debt, we have 10 tips to make sure you never end up with more month than money.

1. Know your income and expenses

The first thing you need to know is what's coming in and what's going out. Make a list of any and all income you have from your job, side work, pension or anywhere else. Then make a list of every bill you have, from rent to car payment. (Don't forget bills that may not arrive monthly, like car insurance.) These are your fixed expenses -- the ones you have limited control over.

The difference between your income and fixed expenses is what's left for the expenses you can control -- your variable expenses.

Most of us have sufficient income to cover our fixed expenses. After all, we wouldn't have taken on obligations we couldn't pay. It's the variable expenses that so often get out of control.

2. Track your expenses

A spending plan, otherwise known as a budget, is the single best way to ensure you live within your means.

A spending plan is exactly what the name implies: It lays out what you plan to spend. To keep tabs on your progress, or lack thereof, you'll need to track your money as you spend it. This used to involve the laborious process of writing down everything you spent, dividing the expenditures into categories, adding them up, and comparing those totals with your plan. These days online budgeting services make the process easy.

If you want to live within your means and reach your goals, you have to track where your money's going. It's the only way to nip problems in the bud.

3. Separate wants and needs

When it comes to shopping, knowing the difference between a want and a need will help keep you out of debt.

Before you make a purchase, ask yourself if you really need it. If you don't, wait before you buy it. I use the 48-hour rule. If I see something I want to buy but don't think I absolutely need, I'll wait 48 hours before I buy it. More often than not, I change my mind.

4. Don't compete

Don't fall victim to the "keeping up with the Joneses" mentality. Sure, your friends or neighbors might drive nicer cars, have the newest technology, or take expensive vacations, but that doesn't mean you have to do the same.

Think of it this way: Your neighbor might have financed that Mercedes, put the new flat-screen on his credit card, and taken out a personal loan to pay for a vacation. You're not a lemming; don't follow the group off a cliff.

Man Taking Money Out of Wallet © NULL/Corbis5. Pay in cash

It isn't always easy or immediately gratifying, but adopting a pay-in-cash lifestyle can save you from falling into a debt trap. For example, when I first moved out of my roommate's place and into my own apartment, I didn't have a TV. At first, I planned to pay for one with my credit card, until I did the math.

Once I realized that interest would radically raise the cost of the TV, I decided to wait. I watched TV on my laptop for a few months, saved up, and bought the TV I wanted outright. I didn't miss out, and I didn't pay extra.

If you can't afford to buy something now, don't pull out the plastic. Instead, save up and pay cash.

6. Keep an emergency fund

Life is unpredictable. In the last year my car broke down, I fell ill twice, I had to take unexpected time off work for family issues, and my AC sprung a leak. But I haven't taken on any debt because I have an emergency fund to tap.

If you don't have three to six months of expenses saved up, start saving now. When something goes wrong -- and it will -- you won't have to reach for your credit card or take out a loan to pay for it.

7. Save money wherever possible

Saving money will help you stop overextending yourself financially. Try these tips to get started:

  • Never walk into the grocery store unprepared. Before you shop, clip or print out coupons, check the weekly circular, and make a list. I estimate I save about $40 a trip this way.
  • Don't pay retail. Sign up for a store's newsletters to get coupons and learn about sales. When shopping online, always compare prices at several sites and look for a coupon or promotional code. Sites like Dealnews, and RetailMeNot will help you find the best deal.
  • Skip designer coffee. Sure, it tastes fantastic, but it's also $4.50 a cup. Make your coffee at home.
  • Buy secondhand. You can find incredible deals at garage sales or in thrift shops.
8. Cut down on expenses

If you're still struggling to live within your means, take a hard look at your expenses. There is probably something you can cut out or at least cut down on. For example:

  • Gym memberships.
  • Hair and nail salons.
  • Cable TV.
  • Cellphone bills.
  • Shopping trips.

Go through your bills and cancel any service you don't use frequently. For the stuff you do use, call the provider and see if you can get a better deal.

9. Boost your income

If all else fails, boost your income. The simplest and most gratifying way is to make more at your current job by getting a raise. If that's not in the cards and you routinely find yourself struggling to make ends meet, it's time to look for a better-paying job.

You have no right to complain about being underpaid if you're not at least looking for better alternatives.

Of course, there are many other ways to increase your income, from selling your stuff to side jobs to turning a hobby into a business. Where there's a will, there's usually a way.

10. Don't deprive yourself

While this is the last tip, it's the most important one.

When you hear terms like "living within your means," especially when combined with words like "budget," it's natural to think about deprivation. You might think there's no difference between "budget" and "diet." They're both about deprivation, right?

Wrong. A diet can be deprivation: Cottage cheese isn't anything close to ice cream. Living within your means, on the other hand, doesn't have to be about deprivation. Spending less on insurance by raising your deductible doesn't negatively impact your life. Nor does having a drink at home with friends instead of paying $8 each at a bar.

In short, you can live within your means and still enjoy life. The trick? Substituting imagination for money. Think about what you really enjoy -- then find a way to get it for less.

Stacy Johnson contributed to this report.

More on Money Talks News:

Aug 10, 2013 11:10AM
Should make it mandatory for high schools to teach a class like this, then make it a required class in college also.
Aug 9, 2013 7:25PM
It seems in today's day and age, #3 seems to be the most challenging for most people.  It's always sad to see those who are unable to tell the difference between a real need and want.
Aug 9, 2013 8:43PM
Why should we live within our means? The government doesn't!
Aug 12, 2013 9:58AM
According to the Brookings Institution and USA Today, there are 13.2% of the population in GOP districts and 15.7% in Democrat districts living at or below poverty levels, amounting to 21.1 and 21.6 Million people respectively ... that's a total of 42.7 million people. Actual unemployment numbers in this country are estimated to be somewhere between 20 and 25%, when you add in the people who have fallen off of the charts because they no longer qualify for any unemployment compensation. This article makes underemployment sound like a slacker situation ... I guess someone would rather work at Walmart for minimum wage that at the higher job they no longer can find. One out of seven people in this country are counting on food stamps to eat. Out of the 8 million that lost there jobs due to the financial crisis, 2 million are still without work, and the majority who found employment, did so at a substantially lower income. This country is the victim of a Great Recession, and the only thing that kept it from becoming "The Great Depression 2" was the money that the government pumped into things for a while, and the unemployment compensation system that was actually put in place to stem these types of economic downturns. While most of the ideas stated in this piece are valid for a stable economic setting, that is not the case for a large proportion of our population, and until there are changes made to promote a situation that spawns GOOD PAYING jobs for the masses, this country is going to flounder, with more and more finding themselves at the lower end of things. Add in devastating inflation trends, a manipulated stock market that has figures not in line with the actual economy, a defated housing market whose figures don't reflect the countless millions of homes that have been abandoned and are in various states of ruin, a financial system that is poised for a second crisis, and a widening gap between the rich and poor, and you have a powder keg that the government refuses to address ... but then again, THEY are the ones who have orchestrated this madness, and both Republicans and Democrats are at fault. At 63, I've watched the downward trend of things happen, and our current situation of third-world status started decades ago, not with the Obamaphone.
Aug 12, 2013 12:53AM
good stuff - I've done all of those for many years - while being bemused by those around me who haven't - meanwhile - I'm ready to retire with enough - those around me say they can't for the foreseeable ...
Aug 9, 2013 11:55PM
I don't need no stinking tips to live within my means!  It's not rocket science.  And yes, I have a credit card balance every month which I pay off in full every month with the money I didn't spend while building the balance.  Again, not rocket science.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.