You hear a lot that it’s wise to live within your means (and even better to live below it), but what does “live within your means” really mean? Well, the answer is pretty simple in theory: don’t spend more than you make. In practice, it requires a bit of planning and thought.

How to live within your means

First off, you’ve got to know what you’ve got to work with. That’s how much you bring home each month (or week, or year, or whatever time period you want to work with.) That includes all sources of income: money you make from a job, passive income, a side business, investments, prizes, gifts, whatever. Everything you make.

You’ve also got to know what you’re spending. And that includes stuff that comes off the top, like taxes and FICA, and stuff that you spend after you get your money. You know, things like paying for a place to live, food, clothes, gas, electric, water, phone service, entertainment, etc.

In order to live within your means, you’ve got to make sure that you’re not spending more than you’re bringing home. Which means you’ve got to have a system in place — either for keeping track, or for making it impossible to overspend.

Where it gets tricky

That sounds simple enough, right? But it gets tricky because we’re human. We’re bad at estimating, especially when it comes to things like time, calories, and money. So, we may make a spending plan, and believe that we’re sticking to it, but then look back on it at the end of the month to find that we’ve overspent. Again. We wonder where we went wrong, but instead of finding out and solving the actual problem, we reason that it happened because “something came up”, and resolve to do better next month.

The thing is, in order to live within your means, you’ve got to make perception match up with reality.

That means tracking and monitoring on a much more frequent basis (ideally daily) so that you actually know for a fact how much you’re spending compared with how much you’ve got left. But don’t worry, you won’t have to do that forever. After a while, your spending levels will become a habit (again, because we’re human, and we make habits out of as much as possible) and you’ll transition to naturally living within your means so long as your income and expenses don’t change dramatically.

Doing this is only tricky because we’re resistant to being “restricted” and “monitored”. (Don’t believe me? Introduce project tracking at your work, and you’ll hear grumbles all around.) This is the case even when we ourselves are the ones doing the restricting and monitoring. But it doesn’t have to be that way.

Change how you look at it

To learn to live within your means, make budgeting and tracking your spending fun. Yes, really. Think of it as a way to get exactly what you want. (Because that’s what it is.) After all, you budget and track in other areas of your life without giving it a second thought.

Think about going to a restaurant and ordering something off the menu. You can’t possibly eat everything, so you choose the items you want to eat. You also naturally make sure that you’ve got a means of paying for what you order. You don’t whine about how awful it is that you can’t eat everything on the entire menu right. now. and you don’t grumble about having to check to make sure that you can pay the bill when it comes.

Budgeting and tracking your spending in other areas of your life is no different — it just comes with the added bonus of reducing stress and aggravation. No more trying to borrow from Peter to pay Paul. No more ache in the pit of your stomach as you wonder how you’ll pay next month’s credit card bill. No more fighting with your spouse over money. Instead, you’ll experience the peace that living with your means can bring.