Both before and after you retire, you can develop strategies to spend less money than you earn. This can allow you to allocate more of your money to investments, which can give you extra security if an emergency arises, and also can allow you to pass more wealth to your family members. Living below your means requires discipline and resistance to peer pressure. You likely will see people with similar incomes to yours who are making more luxury purchases and living “better” than you in a material sense.
Living below your means does not mean that you cannot enjoy life. You can still participate in recreational activities while managing your expenses carefully and avoiding impulsive purchases or actions to impress others. For example, you may want to choose a car that is safe and works well but is not the flashiest model on the market. Or you may not need a full wardrobe of designer clothes just because a friend thinks that you are not trendy enough. If you do not have a significant amount of savings, and you have a long list of items that you want but do not need, you should think carefully about how to streamline the list so that your savings can continue to grow. This will pay off in the long term so that you can enjoy a comfortable and healthy retirement, without having sacrificed anything important before then.
Developing a Budget or Spending Plan
You should be careful not to set unrealistic goals. Forgoing necessities or living a colorless, pleasure-deprived life will not work for an individual or their family. An overly aggressive plan for living below your means can even backfire because an individual may abandon it altogether if they fail to meet their goals. Your targets should be attainable so that you can feel satisfied about meeting them. If you need to make an exception and deviate from a plan, you should feel free to do that as long as it does not become routine.
Ideally, if you are married, you should develop your spending plan in coordination with your spouse. Each of you may have different thoughts about which expenses are higher priorities than others. Finding ways to strike a balance may actually strengthen your relationship and enhance your respect for each other. On the other hand, imposing your plan on your spouse without taking their wishes into account may undermine your marriage.
To monitor a spending plan, you may want to use special software created for the purpose of recording transactions. If you do not feel the need to be so detail-oriented, you may prefer a less rigorous approach, or you may want to apply the rigorous approach only to certain types of expenses. For example, you may know that you need to pay certain costs on an annual basis, while others must be paid each month. The annual costs are more likely to be necessities and may not require constant monitoring, while the monthly costs may warrant a closer eye to detail. You can list the items in your monthly budget by importance so that you know which items to add or remove first if your plan proves to be too strict or too lenient.