Tips for living below your means

The hypothetical portfolio I am putting together is designed for an investor who wants to buy a selection of Mutual Funds and add to their investments by adding $100 per month to each fund. To put this plan into action, you would need to come up with up to $2500 per fund for the initial investment and then another $100 per month for each fund. money

Here is a breakdown of the amounts for three, five and ten funds:

• For three funds $7500 initial, $300 per month.
• For five funds $12,500 initial, $500 per month
• For ten funds $25,000 initial, $1000 per month

So how can someone come up with this much money on a modest income or on any income for that matter? The answer is simple- live below your means. Many folks live above their means and increase their debt month after month. This plan is not for them. Many spend what they make and as they earn more money, spend more. This plan is not for them. No matter how much you make, the way to save and build wealth is to live comfortably below you means. And while the approach is simple enough, executing is not always easy, especially if you live in an expensive city. money

So I am going to start a collection of ideas to reduce the cost of living, making it possible to save and invest. Please post any ideas you have as a comment to this post and I will add them to the list as well. You can also email your ideas to me at wyliemoney at gmail dot com. money

• The first suggestion comes from Dave over at east3rd.com. Dave recommends bicycling to work in general and saving money is not his primary motivation- but any time you find a way to save $70 per month, it is an idea worth sharing.
• Sean suggests paying yourself first by directing a small portion of your paycheck straight to a savings account.
• David mentions buying generic products at the grocery store. I would add that you should not get hung up on only buying generic products. If there are one or two things you really think taste better, buy the brand you like and treat yourself.
  
• Holly suggests that you make your own coffee. This can easily save you $100 a month if you buy coffee out every morning. I like Holly's approach too- do not 'cut out' going to Starbuck's or Dunkin Donuts if you enjoy their sugary treats. Do not go every day and when you do go, you'll enjoy the treat even more. money