living below your means
Spending less than you earn, allowing surplus income to be saved or invested.
Example
“Living below his means on a modest salary allowed him to retire comfortably.”
Memory Tip
BELOW — your lifestyle costs less than your income. The gap is where wealth grows.
Why It Matters
Living below your means is fundamental to building financial security and wealth over time. By consistently spending less than you earn, you create a financial cushion that protects you from unexpected emergencies and enables you to pursue long-term goals like retirement, homeownership, or starting a business.
Common Misconception
Many people mistakenly believe that living below your means requires extreme deprivation and cutting out all enjoyment from life. In reality, it simply means being intentional with spending and prioritizing what truly matters to you while avoiding unnecessary expenses.
In Practice
If someone earns 60,000 dollars per year after taxes and spends only 45,000 dollars annually on housing, food, transportation, and entertainment, they have 15,000 dollars remaining each year. This surplus can be invested in a retirement account or savings account, and over 30 years at a 7 percent return, this discipline could accumulate to over 1.4 million dollars.
Etymology
Traditional financial wisdom — the foundation of wealth accumulation.
Common Misspellings
Build a budget and track your spending
Related Terms
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See Also
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