Spending Below Your Means to Support Long-term Financial Goals

When did your last raise actually make a difference in your personal finances?

Sure, more money is exciting. Without conscious effort, though, that extra cash can disappear just as fast as you make it. Many people see their paychecks grow while their bank balances stay exactly the same. Maybe some extra subscriptions appear, or maybe splurging on the pricier restaurant doesn’t feel so out of reach with a taller stack of cash. That's called lifestyle inflation, and it hits more people than you’d think.

There are little adjustments you can make in your spending that will keep you from completely blowing your newfound financial success, so if you’ve found yourself in the position, worry not!

Redefining "below your means"

Living below your means is a phrase you probably heard your parents or grandparents throw out when you were little. While it seems to carry a negative connotation, the reality is that it doesn't require extreme frugality or giving up everything you enjoy. You can think of it more like an intentional gap between the money you make and what you end up spending.

Living below your means is more or less about giving yourself some financial breathing room. This could look like a person making $75,000 who lives like they make $65,000 instead, then banking then $10,000 difference, or it could be a family that upgrades their lifestyle by using only half of any raise and saving the rest.

Try shifting your mentality about what it means to live below your means by thinking about spending gaps as investments in your future rather than money you're missing out on today. Where can you adjust to create a gap between your earnings and spending?

The 50/30/20 budget as your foundation

If you feel blocked and aren’t sure where to start, you can try implementing a practical framework that financial experts, including our very own Director of Education, Gilles Hudelot, recommend in our one-on-one Mentor sessions known as the 50/30/20 budget. This budgeting approach allocates your after-tax income into three buckets: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

Your needs (50%) cover essential expenses like your rent, utilities, groceries, and minimum debt payments. These are the things that keep your life running smoothly and the things that must be paid each month.

Your wants (30%) include entertainment, dining out, your hobbies, and other lifestyle choices. This percentage is ultimately for your discretionary spending, or the things that you value that aren’t exactly necessities.

Your future (20%) goes toward savings, which includes retirement and extra payments if you’re working on paying debt down. Consider this percentage the part that will transform your present financial reality into future financial security.

What’s beautiful about this framework is the flexibility it provides you. For example, if you're currently spending 35% on wants, all you have to do is shift 5% of that spending toward savings. Simple, right?

Making the gap work for you

The most effective way to implement this strategy is to automate your financial gap. If you set up automatic transfers so your future gets paid first, before you have a chance to spend that money elsewhere, you’re taking away any temptation to spend that cash. That said, when you get a raise, immediately redirect a portion to savings before your spending has a chance to expand to fill your new income level.

It’s okay if you need to start small. Even living 1% below your means can create momentum and build the habit. Someone earning $60,000 who saves just $50 each month is still making a $600 annual gap, and that’s enough for an initial emergency fund or to pay down a credit card. Progress is progress!

The next step is to track this progress without becoming obsessive about every purchase. Awareness is key here. Many people find success with simple systems such as checking spending weekly, using automatic savings transfers, or reviewing their gap percentage every month. Whatever helps you take that step forward is perfectly fine.

Connecting today's choices to tomorrow's dreams

Every dollar you don't spend today is basically a building block for future opportunities, whether that’s growing your emergency fund or serving as the down payment on a home. It might even be the cushion that allows you to take a career risk. Whatever it is, you can align your spending with your values and still get ahead.

The math is powerful here: someone who consistently lives $200 below their monthly means creates $2,400 annually. Over five years, that's $12,000, which is enough for a substantial emergency fund. Over the course of twenty years, if invested wisely, it could be worth significantly more. The possibilities are endless. Isn’t it exciting to think about what a little automated savings could mean for you in just a few short years?

Again, this isn't about depriving yourself of today's happiness for some distant future. It's about choices. When you create that financial gap, you're not living paycheck to paycheck anymore. You have options, and options are a priceless form of freedom.

Common obstacles and practical solutions

Social pressure can often make living below your means more challenging, especially when friends or colleagues appear to be spending freely. Comparison is the thief of joy, though, and it’s important to remember that you can't see other people's debt levels or financial stress. Your gap-building might be the more financially secure path to financial freedom, even if it doesn't look as glamorous from the outside.

For those with variable income, like freelancers, focusing on percentages rather than fixed dollar amounts can be really helpful. In higher-earning months, this means you save more, and in leaner months, you maintain your percentage but reduce the dollar amount. The key is consistency with the principle, not the exact numbers.

If you feel guilty about wanting things you can afford, remember that living below your means still includes room for enjoyment and purchases. That’s the whole point of the 30% wants category; it isn't elimination but intentionality. You're choosing what matters most rather than spending on autopilot.

Your next step toward financial security

Homework time! Your first step is to calculate your current gap or create one if it doesn't exist, then determine your after-tax income and subtract your total monthly expenses. If there's nothing left (or if expenses exceed income), you have a clear starting point.

Step two: Try implementing the 50/30/20 approach for a month. Track where your money goes and see if you can identify opportunities to redirect even small amounts toward savings. Prioritizing progress over perfection here is key, as financial security builds itself one intentional choice at a time. Be easy on yourself as you get started… It’s a marathon, not a sprint.

Living below your means is really about living within your future potential. Each dollar you don't spend today is a vote for the financial life you want tomorrow. This way, your financial security can build itself without you noticing, and small gaps can create big changes.

Future you will be so glad you automated your savings, so get started today! If you’re not digitally tracking your expenses yet, Folio in your Fruition account allows you to sync and view all your accounts in one place. You can also utilize all kinds of features to pay down debt, track investments, and more.