Investing and Debt Pay-Off | Saving and Spending

How to Live Really Well on a Budget

Vacations, nice meals, a posh pad, newer vehicles…While everyone’s definition of living well might be slightly different, most of view living well as living like a rich person and not having to sacrifice quality. Unfortunately, for the average person, it’s hard to be able to afford all of that. But there are ways to live really well on a budget. You can feel like you’re “living the dream” and indulging while still increasing your net worth.

Over the past several years, I made some changes so that I could have more luxury while at the same time, more money. Like most people, I thought I had to live on a strict budget and forego just about everything I wanted just to pay my bills. But then I figured out some ways that have allowed me to live well on a budget. Here are some of those tricks that have made a huge difference:

Prioritize Discretionary Spending

No one can buy everything (even millionaires and billionaires) so you have to choose–and choosing is one of the primary keys to living well. Aside from having an emergency fund, putting money into your IRA and the costs of everyday expenses like housing, what are the other things that matter—or should matter—most to you?

Maybe it’s participating in a hobby or activity each week or traveling to see your family once a year. Or perhaps you can’t live without your daily Starbucks or really enjoy eating at nice restaurants. Really think it through.

You might try listing the top 3 to 5 things that cost money that are really important to you and then numbering them from most important to least. Then you could also list 3 to 5 things that you regularly spend money on that don’t add more value to your life. It could look something like this:

If meeting friends for dinner twice a month makes the top five on your list and you rarely get to go because you feel like you can’t afford it, but you’re spending money on tennis lessons that didn’t even make your top five list then why not cancel the lessons so you can go out to dinner? Or if visiting your family once a year is on your list but you can never go because you’re spending money on something at the bottom of your list, then it’s time to make a change.

Remember, you can’t buy everything. But that’s okay because you can prioritize. Spend your hard-earned money on the things and experiences that matter the most to you (and your loved ones) and forget everything else.

Sometimes “Good Enough” Is Great

I play the piano and am an advanced player; yet the keyboard I play on cost $360—an absolute bargain. I write all the time and am always on my laptop; yet it cost me just $380. And just like most people these days, I’m on the phone a lot; yet my two phones (one personal and one for work), which have worked perfectly well for years, cost just $60 each. And when I buy the one type of alcohol that I’ll drink, which is vodka, I’ll buy the bottle that’s the cheapest because, really, the difference is subtle if anything at all.

My point is, higher priced doesn’t always mean better quality. And, even if something is of higher quality, it doesn’t mean it’s worth it.

What are you spending money on that really doesn’t bring that much extra to your life? Are you falling for that phone upgrade every two years just because the new one has added some silly feature that really doesn’t change your life for the better? Are you trading in your car every few years even though the previous one still looked nice and ran well? Are you spending lots of money on expensive décor in an attempt to get your home to look “perfect?”

While I definitely agree with having standards in life, there has to be a balance. If you’re going broke trying to have the absolute best in every facet of your life, then you might consider giving yourself a break. There are ways to save all around us and that comes from recognizing when having something that is of good—but not necessarily great—quality can still provide us with that sense of indulgence.

Take, for example, my choices in an electric piano, laptop and cell phones: They may not be of the highest quality, but they all the do the job just fine.

Some people would say that this is settling, which will decrease your wealth in the long run because you aren’t striving high enough. I say this is crazy. Warren Buffet still lives in a modest (for him) 3,600 square foot home that he bought in 1958.

And I don’t think really wealthy people like Bill Gates or Mark Zuckerberg got wealthy because they were thinking of how they wanted to buy the best in life. They got wealthy because they love what they do, and are very passionate and good at it. I describe how you can do this, too, in my article 5 Steps to a More Exciting and Lucrative Career.

Choosing to downgrade some items provides a nice compromise: You get to have an item you want without running up your credit card or draining your bank account. Sure, some things are worth the extra expense—like paying a little extra for a car that has a higher safety rating (since this could one day save your life) or paying slightly more for a much better health insurance plan. Superficial things, like my vodka example, aren’t worth the extra expense.

I make myself rich by making my wants few.

Take the Easy and Obvious Discounts

Continuing with my philosophy on taking advantage of easy ways to save, I apply this concept when buying everyday items. Some people are retail snobs. They won’t set foot in a discount store, even if it could save them thousands of dollars in the long run.

This is something I don’t understand. No matter how much money I make, I will always look for ways to save on essential items like food, toiletries, medication and clothing. My philosophy is: “Why pay more when you can pay less?” Paying more for the same item you can get for less is just silly.

In my current city, we have the usual discount clothing stores like Ross and Marshall’s. We also have plenty of dollar stores. I know that many people would be too embarrassed to go into them. (What if someone sees me and thinks I’m poor?!) But not me. I walk into them with my head held high. Why? Because I know I’m about to get some groceries, toiletries and other items for a fraction of the cost..

Of course, one cannot find all needed items at the dollar stores so I supplement my shopping with places like Walgreen’s and a local grocery store which each offer some serious savings as long as I use their discount cards. Fine with me! I see people checking out at both stores who don’t have the stores’ discount cards. This is something else I don’t understand. Why not get the card?

The only exception I make for this strategy is if it will cost me a lot more time to buy a cheaper item that would only save me a small amount (like driving 30 minutes to a store just to save $10 or spending an hour on the web looking for the best price for an inexpensive item).

This is actually one of the differences between rich and poor people: Rich people weigh cost versus time. A poor person will do exactly what I mentioned—drive across town to save $10. Rich people don’t do that. They always consider how much time will be involved versus how much they will save. If it’s going to take you an hour of effort just to save you $5, then you’re better off spending the extra $5 and using the spare time to improve your job skills, network your business or read the latest news on the stock market.

But when a discount is easy to obtain, like discount cards for the places you shop frequently or choosing the same product for a lower price online, then take the discount!

How to Afford a Luxury Place

When it comes to your living quarters, I suggest quality over quantity—meaning you should choose a smaller but nicer place over larger and less posh. The reasons are numerous: 1) You don’t have to buy as much stuff. 2) You’ll pay less in heating and cooling. 3) Things in your home are less likely to break down. 4) There’s less to clean and maintain. 5) You get to live in a nicer and safer neighborhood for a similar price as the larger but more run-down place.

Another reason I recommend this is because you’ll still feel like you’re living a luxurious life without all the extra expenses. I have applied this philosophy to my own life. I recently moved to a smaller—but much nicer—apartment. I thought I would miss the extra square footage but I really don’t. I got rid of items I wasn’t really using before I moved to make sure I could live with less square footage. When I walk into my place now, I smile. It’s smaller but more beautiful and in a nicer area. It also reflects more of the lifestyle I want to lead. Yet it’s only costing me a little bit more than my last place.

If you feel like you might miss the extra space, one idea is to create “nooks” for your needs, such as a couple of book shelves for a “library,” a built-in desk area for an “office,” or a corner of a room for your child’s play area. You can also create your own coffee bar by putting a Keurig or similar one-cup machine on your kitchen counter top and trick it out with flavored syrups, spices or anything else you like to add to your morning java. Another idea is to create your own mini garden by potting a few plants and sticking them on your patio or balcony.

This “smaller is actually better” mentality is something that I learned from the Europeans when I lived in France and then England. As I discuss in my article What the Europeans Taught Me About Being Frugal, their homes are smaller yet they seem happier. One of the reasons could be because they don’t have the stress of having to maintain a large piece of property. This keeps their lives simpler, which frees up money and time.

Finally, you could consider getting a roommate—whether it’s you renting out a room in your place or sharing a place with someone else. While most people readily reject this option, I have found it to be very useful.

When I first moved to a new city years ago, I rented the upstairs from a friend who had a two-story home in an upper middle-class neighborhood. What was great about this situation is that I was able to live in a nice home for a low monthly rate. I didn’t have to pay for insurance, taxes, electricity, repairs or any other cost associated with owning a home. This allowed me to save thousands a year and still live in a safe and decent neighborhood.

Invest the Money You’ve Saved and Watch It Grow

People may feel like the savings earned by shopping at the discount stores and using discount cards isn’t that much but here’s where they’re wrong: I take the money I save (hundreds or more a year) and use it to buy even more dividend-paying stocks. So it’s not just about the savings: It’s about what you can do with that savings, which is invest it to take advantage of compound interest, which will increase your wealth exponentially in the long run.

With the money you save, you can start a “savings” jar or journal. Then, at the end of the year (or even each month) take that money and invest it. (This is the other thing that rich people do: They take what spare money they have and they invest it so that they can make even more money.)

Add up the money you’ve saved, type it into an online calculator that calculated compound interest and choose 7% as your interest, which is the average annual rate of return in stocks including dividends. Now take that and spread it out over 10 or 20 years and watch how your money grows!

Slow Down and Appreciate What’s Around You

Do you ever take a walk and notice the flowers and listen to the bird’s chirp? Do you ever enjoy a lazy afternoon by reading a good book? What about lighting a candle and putting on some soft music while you eat a home-cooked meal?

There are inexpensive and even free opportunities of enjoyment all around you. This goes beyond just looking for discounts. In our frantic world, it’s easy to take the small things for granted. What if the birds stopped chirping, the flowers no longer bloomed, you could never listen to another song again and the only food you could ever eat again tastes like cardboard?

All of these little things, like listening to music, being surrounded by plants and trees and being able to eat such a variety of food are things that make our life more interesting. Yet we rarely notice them, let alone appreciate them.

Slowing down and really noticing and enjoying what is around and in front of you actually helps you live well but within your budget. This is because you will appreciate even the smallest details of your day—those things that are free or nearly so. And when you appreciate these smaller things, you will find more joy in them. When you find more joy in these little things, you won’t need so many “big” things to entertain you and fill you up emotionally—which means you won’t spend as much money.

I think in order to appreciate these smaller things, we have to slow down. I know this can be hard to do. We are all juggling too many things. From Facebook alerts, to children (if you have them), to work demands, to our car needing an oil change, everything seems urgent.

But one of my biggest points of this blog is to encourage readers to live in smaller homes, buy less stuff. By doing so, you won’t have to work as hard to maintain your lifestyle or maintain all of the objects you own. And when you don’t have to work as hard and have less stuff to manage, you create more time and less stress. You can then use that extra time to indulge in a simple pleasure in life, like listening to a song while you sip a cup of tea or stroll through your local park.

There is a popular idea going around about being “present.” What this means is that slowing down enough to appreciate the exact moment you’re in—no thinking about that to-do list or continually glancing at your phone.

Some ideas to practice the art of slowing down:
  • Take a walk and listen to the birds chirp, notice the flowers and smell the fresh air.
  • Play with your children or pet.
  • Give your full attention as you listen to your significant other talk about their day.
  • Set aside 20 minutes twice a week to read a good book.
  • Get some bath bombs or Epsom salts and soak in a hot bath.
Some ideas for enjoying yourself for free or cheap:
  • Meet a friend over a cup of coffee (or one glass of house wine) instead of a meal so you can focus on the conversation, not a plate of food
  • Go to the library and peruse their collection of books, magazines and CD’s. Also, check out their calendar for special events. My local library puts on special events all the time, like workshops and music performances, that are free.
  • Type “free events” and then the name of your city or town into your search engine and see what comes up for the year. Pick out the one that appeals to you the most. Many cities have free movies in the park in the summer. You will probably also find lots of free holiday events, like fireworks for the Fourth of July fireworks, autumn festivals in the fall, and holiday events around Thanksgiving and Christmas.
  • Put a movie night on your calendar. If you have kids, you can hype this up by telling them that you’re going to have a family movie night on Saturday at 7pm. Get some great snacks, dim the lights and stream a movie everyone can enjoy.

It’s Not Really a Budget; It’s a Lifestyle Plan

As I detail in my article, Better Than a Budget: Why You Need a Lifestyle Plan, being more selective in what we spend our money on doesn’t have to feel restrictive. The word “budget” can make us feel like we’re missing out. But it’s really about being choosy and only spending your hard-earned money on what matters most to you. And when you are choosing what matters most to you, you are living well.

Aside from those emergencies that will inevitably come up (you get sick and have a hospital co-pay; you get into a wreck and have to pay your deductible), there will be plenty of people who will want to tell you what you should do with your money; from a relative to the used car salesman to your internet provider who wants to up-sell you to a more expensive plan. You have to have the courage to say no. It’s your life, your vision, your money. Take pride in making smart decisions and enjoying the little things. Your life will be richer for it:)

How are you living well on a budget? Did any of these points help you? I would love to hear from you. Please email me at with your questions or comments!

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