The Cheapskate’s Guide to Living Beneath Your Means

By Daisy Luther

While many people advocate living within your means, I don’t think that’s enough. I’m a proponent of living beneath your means. Within is great – it signifies a lack of debt and only spending what you can afford. But beneath is even better, because it signifies that you have quite a bit left over for dealing with a rainy day.

Living beneath your means may not sound like a whole lot of fun. It sounds as though a person doing this is stuffing coffee cans full of dollar bills into spaces in the walls, darning socks until they simply can’t withstand another repair, and eating cold beans in a darkened room.

In reality, it isn’t like that at all. Learning to live beneath your means can bring you a kind of peace that you never felt before. It can help you survive financial crunches both large and small. It can teach you to take joy in simpler things instead of always looking for the next thing that will give you a surge of happiness.

Some folks are already great at this. It may be elementary to you. Hang in there because there are graduate level frugality ideas on the way. We’re starting off with the fundamentals and will move on toward high-level, PhD thrift from there.

Others have gotten themselves into a pickle and want to figure out a way to get out of it. Some have cut down to the bare bones and are still having trouble. (If you are not making enough money to pay your bills, this article may help.)

But how do you go from a lifestyle in which every dime goes out to one in which there’s money left over each month? Here are some tips to help you make the transition to a more peaceful financial lifestyle. Many of these tips will work even if you’ve already begun having financial problems, but a few are preventative measures that are geared toward making a lifestyle change when you aren’t yet under the gun.

1.) Assess your budget.

The first thing you have to do is get a clear picture of what money goes out each month. If you use a debit card for everything, this is incredibly easy. If you use cash or a combination, you’ll need to spend at least a month taking notes of where your money is going.

Print out your records for the past 2-3 months. Then, plug the numbers into a spreadsheet. This article has 10 different styles of budget spreadsheets that are free. Pick the one that looks like it will work best for you. (Not the debt reduction one, though – save that for later.)

Once this is done, you’ll have a clear picture of where your money is going. This can be a painful step, but it’s essential. (This article is a good one if your frugal living budget may have gone awry.)

2.) Calculate your fixed expenses.

Your fixed expenses are the baseline of your budget. These are the expenditures that don’t (for most people) change from month to month. They are bills like car payments, rent/mortgage, insurance, gym memberships, cell phone bills, cable/internet …you get the idea. You may not have all of these bills – it not, that’s great. If so, you may want to make some adjustments.

You need to know this magic number to set your budget. This number may not be final, as we’ll discuss below, but it is important to know, if you lost your job right this minute, how much your output would be.

3.) What are your bad habits?

After you plug in your numbers and you can see them there in black and white, it’s time for a grim dose of reality. What you’re taking a look at first is those little random expenditures that siphon away money subtly. The $5 here and $10 there.

You may discover that you spend $300-400 each month for a daily lunch out that didn’t seem like much in individual increments, but when you add the daily $5 drive-thru coffees and an afternoon bottle of water, ends up exceeding $500 a month. Half a thousand. Lotsa money.

Maybe you smoke or drink alcohol outside the home on a regular basis. Do what you’re going to do – I’m not here to tell you to stop smoking or drinking –  but look at how much you’re spending to do it. Maybe you buy a giant soda pop out every day for a couple of dollars. That adds up, too.

Nearly everyone discovers that they have at least one bad spending habit in this part. Don’t beat yourself up. Just fix it. Imagine what your life would be like with the money you blow on cigarettes, drive-thru coffee, giant fountain sodas, and happy hour tucked away waiting to help you through an emergency.

Unless you give up some of your bad spending habits and replace them with something more fiscally responsible, it’s going to be tough to live beneath your means.

4.) Start slashing.

Now…it’s time to start slashing those expenditures like Jack the Ripper on a foggy London night.

Getting rid of the bad habits is probably one of the easiest ways to cut spending. Find a substitute that costs less. This can be a process. Not everything has to be cold turkey, especially if you aren’t in a bind. If times are tight, though, you may want to be more relentless and immediate in your cost-cutting.

• Drive-thru coffee: Get a thermos and doctor up your coffee at home, just how you like it, with the perfect amount of cream and sugar. (I have this one, which can be purchased for about the cost of a week of drive-thru coffees.) Like flavored coffees? Check out this list of 25 flavored creamers you can easily make at home.
• Lunches out: If lunch out with your officemates is something you do every day and you’re completely unwilling to give it up, you can work on cutting the costs. Take a morning and afternoon snack to the office and then get something small at lunch, instead of a full meal. Drink water instead of buying a soda pop or a tea. Split a meal with a like-minded colleague. Sometimes it causes fewer questions to just say you’re cutting back (you know you mean money but they think you mean calories). Generally speaking, the portions at restaurants are a bit more than we need anyway, so try just going with a side salad or an appetizer.
• Bring your lunch: It’s even better if you brown bag it instead of going out for a more frugal lunch. When I worked outside the home, I packaged up leftovers every night into a container I could take to work the following day. Then, all I had to do was grab and go in the morning. Bonus – what you bring from home is probably going to be far healthier than what you’d get at a restaurant. If you like to read, bring a book to eat and use your lunch break as some much-needed quiet time.
• Smoking: If you’re a smoker, you already know it’s a terrible habit. I’m not here to tell you that you must stop immediately. That’s your business. But…look at how much money you’re spending!  At the very least, consider cutting back. If you are a pack a day smoker, cut down first to 6 packs per week. Put the money for that extra pack into a jar because the visual can be very inspiring. The more you reduce the amount you smoke, the more money you’ll save. And maybe, one of these days, it will be enough to inspire you to quit altogether.
• Drinking: If you drink alcohol, you probably know that going out and indulging at a bar is about a million times more expensive than doing so at home. Consider limiting this to special occasions or once a week, if you go out often.
• Water: Do you buy a bottle of water every time you walk into the gas station or into a store? Do you hit the vending machine at work to buy one? If so, you know that you could buy an entire case of bottled water for the cost of 2-3 individual ones. Stash cases of water in your car and in your office to quench your thirst. Pick up a small water cooler for your office if you like cold beverages. After the initial investment, it will cost you pennies compared to what you spent before. (And from a prepper point of view, you can’t go wrong with having extra water stashed.)

These are just a few ideas. Your bad spending habits could be totally different. Use these as inspiration for cutting your own bad habit spending.

5.) Can you cut any of your fixed expenses?

This is where you can really make a huge difference in your budget. Can any of your fixed expenses be reduced?

• Maybe your mortgage or car payment can be refinanced at a lower interest rate to get you a better payment.
• Maybe you need to move to a less expensive home or area.
• Maybe you need to get a car that you can pay cash for.
• Perhaps your insurance costs could be lower with a different company.
• Do you actually need cable? Maybe you could switch to Netflix for the annual cost of one month of cable.

This article has more in-depth ideas for reducing your fixed expenses.

6.) Get rid of debt.

One of the best ways to live within your means is to purchase things when you have the money to do so, not when you have a handy payment plan. Many of us already have a heavy debt load. If you have to borrow money to get something, you cannot afford that thing. My dad told me that you should always pay cash for everything, but if you can’t, the only things you should ever borrow money for are cars and homes, and then pay them off as fast as you can.

Nerd Wallet reported that in 2016, the average American family owed $16,748 in credit card debt. The scariest part of that is that most credit cards carry whopping interest rates of more than 20%.

Here’s the rundown on other debt via Nerd Wallet. Ouch.

Get rid of that debt. NOW. With all of the cuts you made above, you need to start paying off your debt.

The best way to do this is with the snowball method, made famous by Dave Ramsey in his best-selling book The Total Money Makeover. I’ve used this method myself and it works like crazy. Here’s a quick summary of how to use the snowball method to pay off your debt quickly.

Once you do these things, you’ll be much closer to living beneath your means.

When you can reduce your expenses enough that you have money at the end of the month instead of month at the end of the money, you are living beneath your means.

After performing these steps, you may have discovered a little bit of money that you could free up, or you may have discovered a lot. That extra money could be enough to change your life and help you weather the storm on the horizon.

This week, take a look at the steps listed above. Apply them right away and see how much you can save. That will get you ready for the next leap toward financial comfort.

This seems like a great idea for a series, right?

When I asked the community on Facebook what they wanted to read about, an overwhelming number of people are looking for ways to reduce their costs of living and get prepped for an uncertain financial future.

Making a lifestyle change like this is a huge undertaking, so I wanted to break it up into a series of shorter articles to make it more approachable. Who knows? Maybe this should be the basis of the next book. 🙂

Please note that when I use the word “cheapskate” that I mean it in the best possible way. I still tip generously, give to charity, and am honest and fair in my business dealings. But when I can skate by the huge expenditures that many people make and figure out a frugal, thrifty way to do things, it makes me happy. Cheapskate is an awesome word when you look at it that way. Embrace it. And don’t get mad about me using the word. If that kind of things upsets you, hang on to your tiara, because I’ll be using it often to put my own spin on things.

If you have questions about getting into the cheapskate groove, post them in the comments section below. I’ll try to address them in upcoming articles. I want to write about the things that YOU want to read and I want to help you with the issues that concern you most. Don’t be shy – let me know.