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By living "below" your means I'm asking about spending significantly less than you could, rather than living "within" your means which of course is sensible if you are able to do it!

So for example:

Buying a house that's much smaller / in a worse neighbourhood / etc because it's much cheaper, even though you could afford the payments comfortably on a larger mortgage for a 'better' place and most people with the same income would buy the 'better' house.

Buying a (reputable) used car rather than new.

(Edited to add: buying a car, even used, rather than taking out one of those "contract" schemes.)

That's assuming the money "saved" would be put into savings/investments... not just spent on 'women and whisky'.

I've heard most of the "financially independent, retire early" upsides to living significantly below your means, but are there any (primarily financial) downsides?

First, it's important to differentiate between "living below your means" and being smart about money. Buying a used car with low mileage is generally a smart financial decision considering every car becomes a used car the second you drive it off the lot. O

Financially, there are only advantages to living below your means. You will save more money which can be invested and/or used for retirement.

The disadvantages are both subjective and personal. For example, not everyone wants a big house. If you prefer a house that is only a fraction of what you could spend, then go for it. If you can afford your dream home and settle for something below your means, that's a personal decision. There's no right or wrong approach to this.

You should also consider the hidden costs of saving money. For example, buying a beatdown car could lead to more repair costs down the line and buying the cheapest junk food could lead to health issues.

I prefer a middle ground between frugality and enjoyability. I'm not going to buy a crazy sports car just because I can afford it but I'm not going to buy the cheapest car just to save money. At the end of the day, you're working for a reason so you may as well enjoy some of the fruits of your labor.

The downside to living below your means, is that you don't have the same level of luxuries attainable if you lived at your means. You may also have fewer opportunities.

This can impact your life in many ways, including financial. Living in a worse area to save money would be the most common example where the benefits may be deceiving. e.g. your commute might be longer [make sure you factor in the higher transportation costs, and the value of your time lost stuck in traffic!]. So there's a difference between living in a small home that suits your needs, but has access to good employment opportunities, and buying an acreage 2 hours away from your job. Both ideas save money at first glance, but one will cost you more in the long run.

Beyond that, does the worse area have good schools for your children, if applicable? There are many ways that your quality of life would improve by living somewhere nicer - as long as you live within / below your means enough that you don't become destitute when you retire!

The obvious downside is in relation to home ownership. If you take out a bigger mortgage to get a more expensive house you will get a larger capital gain when you come to sell the house.

The return on investment may not be quite as good as stocks, but it is far cheaper to borrow money to buy a house. Many lenders won't lend you money to buy stocks at any price.

The big financial disadvantage is likely to be the risk that the low priced home you purchase appreciates more slowly (or declines in value) compared to the better house you could have afforded. This is obviously very location dependent but there are, for example, plenty of neighborhoods in Detroit where home prices haven't recovered since the 2008 recession. If you buy a home in a relatively high crime area that is in a lousy school district and a lot of your neighbors go into foreclosure, the demand for your house will decline significantly which can very quickly put you underwater in your mortgage. If you invested in a home in a nicer neighborhood with a better school district, you're likely to see a higher rate of appreciation at least over the mid to long term. Of course, this is an extreme example-- there are plenty of "less desirable" neighborhoods that are going to see strong appreciation.

If you spend your "saved" money on women, whiskey, birds and fast cars then you are not living below your means. Thus, that line of reasoning is flawed.

And, of course, the real question is HOW FAR BELOW YOUR MEANS you contemplate living? Are you a rich miser, or are you upper middle class and live on the edge of the expensive district, thus having a serviceably nice house and good schools without paying through the nose to keep up with the Joneses.