4 Benefits to Living Below Your Means

By Sabrina Vienneau

The idea of living below your means may sound awful—or, at best, uncomfortable. But consider this Swedish proverb, “He who buys what he does not need, steals from himself.”

There are advantages of living below your means. My family and I have spent the last 20 years pretending our household income is a fraction of what it is, and have realized some significant benefits. If you are experiencing a less than ideal financial situation, please do what you can—even if it’s for a few select benefits. 

Here are four benefits to inspire you:

1. Our children are developing a good financial mindset 

Children don’t just listen to what we say, they watch what we do and absorb our habits. What’s the best way to teach your kids to be financially responsible? Modeling and discussing why you choose to live below your means increases the likelihood of your kids eventually doing the same. Living below your income can also mean your child is less likely to associate material objects with their happiness and self-esteem.

We haven’t taken a big, expensive family vacation for a few years and while my daughters complain at times, they often surprise me with their insight and gratitude. Recently we rented a one-room cabin in a state park near a somewhat gritty beach. 

“Mom, this is just like Hawaii,” my nine-year-old stated while walking along the water. I was pleasantly surprised by her attitude and asked why she thought so. “Well, there are birds all around, there’s water for swimming, we can buy ice cream at the shack, which is sort of like Hawaiian snow cones.” 

I loved that she focused on the positives. The next time you’re faced with a financial decision, try bringing your kids into the conversation. Talk to them about the consequences of splurging versus a mindful decision to consider all the options. 

2. Spending less now generates more later

When my husband and I were searching for our first home, we were preapproved for a good-sized mortgage. But that number felt uncomfortable to us; the idea of having a large mortgage seemed like the house would own us, rather than the other way around. Instead we opted for a modest two-bedroom house in a great neighborhood. To be clear, we had to give up the idea of “keeping up with the Joneses.” 

The house was significantly smaller and less than half the cost of what our friends were buying. This turned out to be a sound decision because, after five years—and a promotion at work—we upgraded to a slightly nicer home and kept the original property as a rental. 

Because of the low payment on our first mortgage, the rental income covers our first home plus one third of our new mortgage. The discipline to curb our spending and divert excess income toward saving and investing has helped us generate wealth. 

This same principle can be applied to investing in your future. Living beneath your means frees up money that can be put to work for you. What if, instead of an expensive family vacation, you opted for a camping trip one summer? For example, if you invested the $4,000 earmarked for the trip at a 7% return, it could be worth $7,869 in 10 years. 

3. Thoughtful material purchasing created better memories 

If there is one thing the COVID-19 pandemic has taught us, it’s that time spent making human connections is deeply valuable. Living below your means doesn’t mean skimping on making memories. It’s actually quite the opposite—by not spending so much on material items, you have more to spend on experiences with those you care about. 

In a 20-year study, Cornell psychology professor, Dr. Thomas Gilovich, found that material things do not deliver the long-lasting happiness of experiences. 

“You can really like your material stuff,” said Dr. Gilovich. “You can think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are a part of you. We are the sum of our experiences.”

This concept became concrete when I had my first child. My employer offered up to 16 weeks of maternity leave, but 10 of those weeks were unpaid. Living in that tiny starter house and driving a 12-year-old car finally paid off. We had savings that allowed me to spend 16 weeks bonding with my little girl. 

Even better, my family spent three of those weeks traveling across the country introducing our little bundle to relatives. That blissful time was worth way more than any material item I could have purchased. 

4. Less debt equal less stress

If you have been living above your means, you’ve likely been acquiring debt. Unfortunately, debt and stress go together like peanut butter and jelly. An article in Psychology Today argues that stress and anxiety over money owed equate to financial PTSD. 

Most people have some debt, but when faced with a period of extended, unexpected unemployment, my husband and I found ourselves employing some challenging maneuvers to pay our monthly bills. While we grappled with our dwindling cash flow, the circumstances also brought a palatable amount of stress to our family.

Life occasionally throws you into situations where you can’t help but to find yourself in debt— medical bills, job loss, failed business ventures. Be wary of putting yourself into this situation by spending beyond your means. Even spending at your means could prevent you from building emergency savings. 

If you are in debt, check out resources like the Banzai debt repayment coach to design a plan for repayment. Have a clear path forward to financial—and psychological—freedom. The next step is to spend below your income and put the excess toward paying off debt. It’s really about sticking to a budget. This strategy not only digs you out of your financial hole and reduces what you pay in interest but provides much-needed stress relief. 

Sabrina Vienneau is a writer and Financial Education Manager with Mountain America Credit Union.

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