• Michael Huskey

Are you actually living within your means?

I talk to a lot of people about personal finance. I know what a boring subject. But, for whatever reason, I find it incredibly interesting. Usually, after going on a tangent and finding myself down a rabbit hole, somebody says,

“Yeah, personal finance is easy. You just have to live within your means.”

Live within your means. But what does that even mean? Could you put a dollar amount on what your means are? My guess is you probably could not. So if mastering personal finance is all about living within your means, and you don’t even know what your means are, I think we might be in a bit of trouble.

Knowing and understanding the concept of means is the foundation of being financially literate. Thus, if you relate to the difficulties of the financial world, understanding your means is a perfect place to begin.


The first place to start when you are calculating your means is, to begin with, your liabilities. These are payments you have to make every month, and if you don’t make the payment deadline, your credit score will take a hit. The lower your credit score is, the more expensive it will be to borrow money in the future. A practical example of this is on your mortgage. The higher your credit, the lower the interest rate banks will offer you for your loan.

Common Liabilities

  • Rent/Mortgage

  • Student Loans

  • Medical Loans

  • Car Expenses: Car/Lease Payments & Insurance

  • Phone Expenses: Phone Payments & Wirelss Service Payments

This is the first and most inflexible part of your means. What I mean when I say inflexible is that you have very little ability to change how much these cost once you have them. With these liabilities, you are signing a contract to make these payments at specified amounts. Thus, it is ideal to know your financial situation and set affordable liability costs from the start. If you are already in a place of set liability payments with little room to change (inflexible), do not worry -- the other aspects that encompass means provide substantially more flexibility to improve.

Required Expenses

The next part of calculating your means is adding up your required expenses. These are expenses that can change based on your consumption. Think of your heating bill. In the summer it is less than it is in the winter. Expenses are different than liabilities because you do not have a contract to pay a specific amount each month. It is based on your consumption, not a contractual agreement.

Common Required Expenses

  • Utilities - Internet, Water, Gas, Electricity

  • Gas

  • Groceries

  • Clothes

With these, you have more flexibility in lowering these amounts -- not by a lot. Still, you can definitely make choices to reduce them. The easiest one I usually preach to people trying to lower their expenses is with their groceries. Start shopping at Aldi instead of Whole Foods, you can thank me later.

Frivolous Expenses

The last part of your means is where blogs tend to tackle first. You will see a lot of articles debating if you should or should not buy the cup of coffee. This article is not even going to touch that thorny subject.

Common Frivolous Expenses

  • Eating Out

  • Designer Clothes

  • Streaming Services

You have the most flexibility around these expenses. You are not required to buy any of these things. Yes, you could cancel your Netflix subscription. I know it is tough to be the person at lunch who isn’t on top of the latest Netflix show.

How do I know if my “means” are too high?

I am sure as some of you were reading this, you started adding up your liabilities and expenses and are now wondering if your means are too high. So my personal advice would be to make sure your means are no more than 75% of your paycheck. This is a high number, some people in the Financially Independent Retire Early (FIRE) movement would say it should be closer to 50% to 40%. That lifestyle is not for everybody. If, after doing the math, your means are less than 75% of your paycheck, you should feel pretty good.

In summary...

Your means are broken down into three main categories

  • Liabilities - must pay, fixed amount, not much flexibility around lowering these in the short-term

  • Required Expenses - must pay, a variable amount, some flexibility around reducing in the short-term

  • Frivolous Expenses - not required to buy, a variable amount, a lot of flexibility around reducing in the short-term

If your means are less than 75% of your paycheck, you are in a decent position. If you are higher than this, the first place you can go to better your situation is your frivolous expenses. The remaining money you should save and invest, but the details of that cannot be captured in an article.

I know this is not a terribly exciting topic. Still, I hope I was able to bring some value to you and help you get a little bit closer to mastering your finances.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions

About the Author

I am a 25-year-old writer writing about topics that I am interested in and passionate about. Those topics right now are personal finance, business, and some self-help. I try to bring to my unique perspective to any article I write and hope that my perspective can provide value to my readers. If you have any comments or questions around any of my articles or if you have suggestions for future articles, feel free to email me at huskdoes@gmail.com

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