Why living below your means can help you find a better job
Sooner or later you're going to have to find a new job. Maybe you'll decide you can't take another day of the crap your boss is putting you through. Maybe you'll get laid off, or maybe you'll just decide to move to a new city.
Whatever the reason, when you're looking for a new job one of the keys to success is the ability to be choosy. If you need a job right now to pay your bills that means you've got no negotiating leverage. And there's no reason to think the first job offer you get will be the best job for you; maybe it'll be the second offer, or the tenth.
It's true that having in-demand skills or being great at interviews will help you get more and better offers. But interviewing for jobs always takes time... and if you can't afford to go without income for long then you won't be able to pick and choose between offers.
How do you make sure you don't need to find a new job immediately and that you can be choosy about which job you take? By living below your means.
Saving for a rainy day
You're going to have to find a new job someday but you should start preparing right now. By the time you realize you need a new job it may be too late. How do you prepare? By saving money in an easy to access way, an emergency stash that will pay for your expenses while you have no income. Cash in the bank is a fine way to do this since the goal is not to maximize returns, the goal is to have money available when you need it.
Let's say you need to spend 100 Gold Pieces a month to sustain your current lifestyle. And you decide you want 4 months of expenses saved just in case you lose your job during a recession, when jobs will take longer to find. That means you need 400GP savings in the bank.
If your expenses are 100GP and you have no savings that suggests your take-home pay is also 100GP (if you're spending more than you make better fix that first!). Increasing pay is hard to do quickly, so you need to reduce your spending temporarily until you have those 400GP saved. At that point you can go back to spending your full paycheck with the knowledge that you have money saved for a rainy day.
But you can do better.
Living below your means
If you're always spending less than your income you get a double benefit: you're saving more and it takes you longer to exhaust your savings. To see that we can look at two two scenarios, one where you permanently reduce your spending to 80GP a month and another where you permanently reduce it to 50GP a month.
Scenario 1: You have 100GP take-home pay, 80GP expenses. You're saving 20GP a month, so it will take you 20 months to save 400GP. Since your monthly expenses are 80GP this means you can now go 400/80 = 5 months without any pay.
Scenario 2: You have 100GP take-home pay, 50GP expenses. You're saving 50GP a month, so it will take you 8 months to save 400GP. Since your monthly expenses are 50GP this means you can now go 400/50 = 8 months without any pay.
As you can see, the lower your expenses the better off you are. At 80GP/month expenses it takes you 20 months to save 5 months' worth of expenses. At 50GP/month expenses it only takes you 8 months to save 8 months' worth of expenses. Reducing your expenses allows you to save faster and makes your money last longer!
The longer your money lasts the more leverage you have during a job search: you can walk away from a bad job offer and have an easier time negotiating a better offer. And you also have the option of taking a lower-paid job if that job is attractive enough in other ways. Finally, a permanently reduced cost of living also means that over time you are less and less reliant on your job as a source of income.
Reduce your expenses today!
To prepare for the day when you need to look for a job you should reduce expenses temporarily until you've saved enough to pay for a few months' living expenses. Once you've done that you'll have a sense of whether that lower level of expenses works for you; there's a pretty good chance you'll be just as happy at 90GP or 80GP as at 100GP.
In that case you should permanently reduce your expenses rather than going back to 100GP a month. You'll have more money in the bank, you'll have money you can invest for the long term, and the money you have saved will last you longer when you eventually have to look for a new job.
One reason you might want to look for a job is to find one with better hours than your current one. And having money in the bank is also useful when you're negotiating for a shorter workweek at your current job. If you want to learn more check out The Programmer's Guide to a Sane Workweek.