Living Below Your Means
Definition
A financial philosophy of spending less than you earn, creating a surplus for saving and investing. This habit is the foundation of building wealth over time, regardless of income level. It requires distinguishing needs from wants.
Related terms
- Savings RateThe percentage of income that is saved or invested rather than spent. Calculated by dividing total savings by total income. A higher savings rate accelerates progress toward financial goals and financial independence.
- BudgetA financial plan that outlines expected income and expenses over a specific period. Creating and following a budget is essential for managing money and achieving financial goals.
- Financial IndependenceThe state of having enough income from investments, savings, or passive sources to cover living expenses without needing to work for money. Often defined as having 25 times your annual expenses saved, based on the 4% withdrawal rule.
By the numbers
What the data says
- August 2025
4.1%
US personal saving rate as a share of disposable income
Source: Bureau of Economic Analysis, Personal Income and Outlays - 2024 survey, published May 2025
63%
Adults who could cover a $400 emergency expense with cash or its equivalent
Unchanged from the two previous years
Source: Federal Reserve, Economic Well-Being of US Households in 2024 - 2025
24%
US adults with no emergency savings at all
Only 46% could cover three months of expenses
Source: Bankrate, Annual Emergency Savings Report
National figures from the sources shown, as of the period on each card. They are context, not a forecast or advice for your situation.
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