Living below one's means: What and How?

We all can relate to the phenomenon of running out of money before the months runs out. What does it imply? Do we spend excessively? Or we do not earn enough? The answer can be none of the above. Let me draw an example that happened to each and every one of us when we got our first salary or income. Whenever we got our first salary or income we thought how I can spend this money for my family or for myself. Thus we end up buying clothes for family members, unnecessary gadgets for ourselves and before the month hits three and zero our pocket reaches zero.

Living below means is not reflection of frugal living rather it is the living process of understanding the flow and outflow of money and this plan our expenditure pattern accordingly.

So, what can we do? Should we live like a miser so that we have an amount left in our pocket before the month end?  May be that is not entirely a good idea. Bill Gates who has ranked in the first few of the richest person in the world used a car for so many years that it had a dent on the top of the car. The dent was caused by Gates himself as he put his briefcase over the car while opening the car door and thus gradually over the year the roof of the car suffered from a dent courtesy of the richest man on the planet.  What does the story imply? Was Gates a miser? Or he was just simply to busy to buy a new car?

The reason is Bill Gates discovered the topmost secret of personal financial productivity and freedom which is living below your means. Thus Gates applied this in his life and got the best outcome out of it. Living below means implies that we should live and spend within a certain range of our financial capacity so that we don't run out of many before we run out of days. Living below means is not reflection of frugal living rather it is the living process of understanding the flow and outflow of money and this plan our expenditure pattern accordingly. Briefly the core factors that will ensure the process of living below your means are discussed in the following:

1. Budget, Budget and Budget:

It may sound like a lot of work to keep track of a budget and live accordingly but to sustain in the society that is subject to increase the proportionate amount of expenditure in relation to the income, budget is a mist used tool to live by. From the budget we can know about the actual flow of income and the possible flow of outcome as well. This will leave us with the balance in hand that will remain after the expenditure. If the balance is satisfying then the process is okay unless otherwise if balance is low or negative so the individual needs to draw reduction in the amount of the expenditure and this reducing prospect is the first step to living below your means, which indicates to not spent the amount of money that you have the capability and authority to spend in any way necessary.  So, budget is required to show us the sectors where we can cut short our expenditure and live below the means.

2. Cross Check Expenditure:

Before we make any decision that involves a great amount of expenditure we must check and cross check the expenditure to validate the expense. We need to list down or probable expenditure and conduct an assessment based on the most significant and important expenditure and thus we can know what expense to be a part of and what not. Through cross checking the highlight reason and motive of expenditure has to be finalized. This assessment will provide us with the top most expenditure that has to be done and along with that the least important expenditure can be identified.  Balancing these, if we cut down the least important expenditure then we will able to constitute the basic of leaving below one's means.

3. Cash Flow Literacy:

Cash flow literacy indicates to the knowledge regarding the cash flow of the individual. It is about and a sort of hold on the financial inputs and outputs of the individual. Through cash flow literacy a person will able to assess the sources of income and cash inflow, on the other hand the possible sectors and options for expenditure can also be identified from the cash flow.  The importance and relevance of cash flow in relation to the living below the means is that from the previous cash flow a prediction can be done regarding the balance in hand and pattern of expenditure and based on that the person can plan the income generation and expenditure thus attaining the unique opportunity to live below one's means. The cash flow will also put a restriction of unnecessary expense and through that the process of living below one's means is constituted.  

From the aforementioned subject matters it can be stated that these are the core steps that are required to be taken to climb the ladder of living below one's means. Implementing fully or partly these aspects are the building block of formulating a continual process where in the long run it will result to be an eminent tool and procedure of managing living below the means.  Following these steps and advice the attainment of living below means is possible thus ensuring that our money won't run out before the days of the month runs out.

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About the Author


Nafees is a business student, a freelance writer and a top-notch public speaker at dhaka toastmasters club.