Avoid or minimize credit
Any form of credit can allow you to spend beyond your means. American households collectively had $17.94 trillion in debt as of the third quarter of 2024, according to the Federal Reserve Bank of New York. That includes $1.17 trillion in credit card debt — a record high.
By avoiding or restricting debt you could take the first step toward living below your means and improving your financial position. Paying down debt — especially if it comes with a high interest rate — could put you on solid footing.
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Learn moreAdd a margin of safety to your budget
Sticking to a budget may seem like common sense, but so often this rule is broken. For instance, 51% of Americans confessed to overspending to impress someone else, according to a 2024 survey commissioned by LendingTree. Among those who overspent to show off, 56% admitted this impulse has driven them into debt.
Since it’s common for consumers to go over your budget, it can make sense to add a margin of safety. If you assume that all your expenses will be 10% to 15% higher, for example, you can limit the chances of overspending and relying on credit.
In cases where exceeding your budget is a necessity rather than a compulsion, it pays to have an emergency fund to fall back on. Stashing away three to six months’ worth of expenses can help you stay afloat if your life takes a sudden financial turn.
Prioritize needs over wants
Differentiating between what’s necessary and what’s simply tempting is a key part of living within your means.
“I know I can live more lavishly, more luxuriously,” Bautista said. “That money in the bank means more to me than something I don’t really need.”
By resisting indulgences, you could limit your chances of overspending and overborrowing, putting you on a clearer path to financial freedom.
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