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Living within your means: What it is & how to do it

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When it comes to achieving financial stability, you’ve probably heard the age-old advice to “live within your means.” But what does that mean? And what does it look like for you, specifically? Here’s the gist.

What does it mean to live within your means?

Living within your means is when your spending and saving is less than or equal to your income. Living within your means can look like delaying a large purchase until a later day, when you have earned enough money to pay for it. It typically also includes planning ahead for future expenses or an emergency by saving up money.

What happens when you spend more than you earn?

When you spend more than you earn, it's called overspending. For many Americans, this familiar word is often wrapped up in more than a poor financial decision. Overspending can be triggered by psychological and emotional factors. In a Family Financial Foundations survey conducted by Thrivent*, 21% of respondents said their biggest financial regret was overspending.

21% of Americans say their biggest financial regret is overspending.
Family Financial Foundations Survey by Thrivent

How can you tell if you are living within your means?

You can tell if you are living within your means by subtracting your spending and saving from what you earn each month. To get started, you might take your income and subtract your saving first. Next, subtract your ongoing expenses, such as bills, loan payments and subscriptions. Finally, the money you have left is for everything else. This extra money can be spent on dining out, entertainment, clothing and more.

But wait a minute. Should you really add money to your savings before you pay your bills?

The (perhaps surprising) answer is: yes. And here’s the thinking. It can be hard to tuck money away when you have bills to pay and essentials to buy. Using the “pay yourself first” method can help. When you pay yourself first, you put a portion of your paycheck into your savings, retirement, emergency or other goal-based savings accounts before you do anything else with it.

After a month or two, you likely won't even notice this sum is "gone" from your budget. When you add to your savings immediately after you get paid, your monthly spending naturally adjusts to what's left. Paying yourself first can be effective because it ensures you save something every pay period, and it eliminates the possibility that you'll spend money you intended to save.

How can you stop overspending & live within your means starting today?

There are four things you can do today to stop overspending and live within your means. You can set a financial goal, track spending, use debt mindfully and save for future expenses and emergencies. By building these four healthy financial habits, you can feel more confident about living within your means.

1. Set a financial goal

When you have clear financial goals, it becomes easier to figure out how to reach them. Experts often recommend setting a “SMART” financial goal. This acronym stands for Specific, Measurable, Achievable, Relevant and Time-bound. Using the SMART method to create goals can help improve your odds of successfully reaching your goal.

Take a look at these two goal statements. Can you tell which one uses the SMART method?

  • I'd like to save for a house down payment.
  • I've identified the neighborhood to raise a family in and know the home prices there. For the next three years, I'm putting $500 a month into a money market account for a down payment.

If you said that the second statement uses the SMART method, you are right. The second goal allows you to track progress and make adjustments as you go. It can help improve your odds of success.

2. Track what you earn & spend each month

Whether you prefer handwritten budgets or a smartphone app, there are options to help you see where your money is going. Choose a day each month to track what you earn and spend. For a do-it-yourself approach, consider using a popular budgeting app. You can also use Thrivent Credit Union’s BalanceWorks® to start a budget on your computer. If you prefer expert guidance on budgeting, consider contacting MoneyCanvas™—a free virtual coaching program from Thrivent.

3. Use debt mindfully

Debt can be a useful tool to help you and loved ones grow. When used mindfully, debt can enable an education that launches a first job. Loans and credit cards can help you build a credit history that enables purchases later in life such as a car or home. A mortgage can help you create a stable living environment and build a long-term financial asset—a house.

But debt can have a dark side, too. Too much of it, and you may find your goals become harder to reach. To make your money work harder for you, be mindful about how and when you take on new debt. Think carefully about how you will pay off existing loans and credit card bills in a way that supports your life and financial goals. You may find it helpful to use these tips for evaluating good and bad debt.

If you are struggling with an existing debt such as a loan, credit card or mortgage payment, you’re not alone. Existing debts can sometimes feel hard to climb out from under. Consider these four steps to navigate and manage existing debt.

4. Save for emergencies & future expenses

Can you think of the last time you got an unexpected bill? How about a cost that was greater than expected? If you had enough money in the bank, it probably felt okay. And if not, you may be looking for a way to avoid that feeling again. Whether it’s losing a job, or paying for a surprise repair, unforeseen expenses are a fact of life. You can prepare by saving up. Having enough cash on hand for an emergency or future expense can help you avoid hefty credit card charges and the interest payments that come with a loan.

Consider partnering with a financial advisor or money coach

If you’re looking for motivation, support and advice on your financial journey, consider working with an expert. Two options are available from Thrivent.

Financial advisor

If you are interested in creating a financial plan and understanding your current situation holistically, Thrivent’s team of financial advisors can help you develop a strategy to move toward your goals.

Money coach

Are you just getting started or looking for a simpler way to budget? Money Canvas™ is a free virtual money coaching service that helps you see your money in a new way and build better saving habits.

*This poll was conducted in August 2023 among a national sample of 2,214 adults. The interviews were conducted online, and the data were weighted to approximate a target sample of adults based on age, gender, educational attainment, race, and region. Results from the full survey have a margin of error of +/- 2%.