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You’ve probably heard this formula for financial independence: live within your means by cutting your expenses, increasing your income, and investing the difference.

Living within your means can help you break the paycheck-to-paycheck cycle, get out of debt, prepare for emergencies, and invest more for retirement. In other words, it is crucial if you want to achieve financial freedom.

Here are some tips and tricks to help you live within your means.

Why is it important to live within your means?

Living within your means means making sure your expenses are less than your income.

Of course, the best way to find out if you’re spending less than you earn is to track your expenses. There are plenty of apps that can help you get started with expense tracking.

If you haven’t started tracking your expenses yet, I highly recommend it. When I started my journey to financial freedom, I made spending tracking my first step.

Two of the biggest benefits of living within your means are becoming debt-free faster and breaking the paycheck-to-payroll cycle. Let’s explore them a little more.

Kick the blame on the curb

Living within your means can help you pay off your student loan and credit card debt — and then keep you out of the debt cycle.

As you cut your expenses, you may end up paying more than the minimum amount on your debts. This will help you pay off your debt, instead of paying an endless cycle of interest charges.

If I use a credit card, I make sure to pay my balance in full right away. I only lost $5 in interest – and you can bet I’ll never make that mistake again.

I also use my credit card rewards to help invest for my retirement. My rewards are automatically added to my Roth IRA and invested.

If you do need to use your credit card for emergencies, make sure you have an emergency fund in a savings or checking account that can cover your credit card bill. That way you don’t pay interest on a calamity.

Break the cycle from paycheck to paycheck

If you find yourself barely passing by when payday rolls around, you’re not alone. In a recent survey of 3,000 Americans, more than 61% reported living paycheck to paycheck.

The best way to break the paycheck-to-payroll cycle is to understand your cash flow. Your cash flow is your income coming in minus your expenses going out. If your monthly income is $2,500 and you spend $2,300, your cash flow is $200.

If your cash flow is negative, you are spending more than your income. The problem with negative cash flow is that you are “borrowing” from your next source of income.

Other problems of living beyond your means can include:

Lag with monthly chargesLate feesLow balance feesPossible evictionRequisition of financed itemsMajor emergencies

If your goal is financial freedom, you need to increase your cash flow as much as possible. Greater cash flow means you will invest. And the sooner you start investing, the better. By investing earlier, you can harness the power of compound growth.

Why financial freedom?

Why make financial freedom a goal? Everyone has a different motive for wanting to live on their own terms and not worry about money.

I strive for financial freedom to do more things that I enjoy, such as travelling. And since I started living within my means, I’ve been able to fund a lifestyle change and move in with my partner. The freedom of my savings allows me to find flexibility through freelance work.

How would financial freedom change your lifestyle? Want to get more of your time back? Do you want to travel more? How about spending more time with your family?

Learn more:

How do you live within your means?

There are many ways to live within your means. However, not all tips apply. Since our resources are different, some of my suggestions may not apply to you.

Four categories make up the bulk of my monthly expenses: housing, transportation, food, and debt. If you can eliminate large parts of these categories, it becomes less difficult to live within your means.

There are also themes and ideas that you can implement to live within your means, such as frugality, minimalism, discount, and budgeting. These themes are common in the financial independence community.


I have been able to keep my housing costs around 25% of my net income. That’s because I’ve been lucky and live in a cheap area. And before I started freelancing, I also had to take a short drive to work.

Even if your housing costs amount to around 30% of your income, you can still live within your means. If you can, try to lower your energy bill or save on other living expenses.


The downside of the cheap housing is that public transport isn’t great – ie non-existent. Since there is no public transport at all, I need a car.

I bought a modest 2018 Toyota Corolla with car payments below the national average of $500. And the gas mileage on the Corolla has been a lifesaver, especially since my significant other sometimes has appointments that require round trips of over 200 miles.


I value high quality food more than future doctor’s appointments and health bills. There are still many ways to save on groceries without sacrificing quality. Make sure to try the cashback apps I mention in the Couponing section.

One of the many ways I save money is knowing when organic is preferred and when non-organic can be substituted. Check out the Environmental Working Group’s Dirty Dozen and Clean 15 list to see which foods to splurge on organic.


During your financial freedom journey, various themes become second nature. One of these themes is frugality. Thrift is much more than saving money. It’s about finding the balance between value, wants, needs and usability. It’s about finding the right ‘tool’ for the job at the right price and perceived value. In my low-cost living environment, I can be frugal by shopping at several stores near each other.

Minimalism & Value

Another theme on your financial freedom journey is value. You may have come across the term “valuist.” It can sometimes be combined with ‘minimalist’. Whatever you call it, it means that you only buy things that you find value in.

I consider myself a minimalist. However, I have a lot of stuff. When I recently moved, it took two more car loads. I also gave away or sold as many unnecessary items as possible.

discount coupon

Always keep an eye out for coupons or sale ads for the places you shop the most. Knowing what’s on offer and when can be beneficial. Buying what you need when it’s on sale will save you money. Also, a quick glance at the store’s app or paper flyer can yield a huge return on investment (ROI) in the short term.

In addition to clipping coupons, I recommend using the cashback apps from sites and stores you frequent. Saving a few extra dollars when you go out or shop online can increase your savings rate.


Either you like budgeting or you hate it. There is no middle ground. If you choose to budget, my favorite app is You Need A Budget or YNAB.

YNAB is particularly useful because it helps you “age” your money, that is, extend the time between when you receive money and when you spend it. This is a great tool to help you live within your means.

Aging your money for 30 days can break the paycheck-to-payroll cycle. If you get paid every two weeks or monthly, that means you can get one or two paychecks without getting paid.

Why is it difficult to live within your means?

Living within your means can be difficult, purely because of the monthly expenses. The average American household spends about $5,100 per month, or nearly $61,000 per year. In the interest of transparency, my gross income year was just over $48,000. That means I earned less than the average household spends!

Depending on your income, it can be difficult to live within your means in an area with a high cost of living. In some parts of the country, your housing costs can exceed 50% of the family income. If you have a lower-income household in an expensive environment, you should have a good spending pattern.

Sobriety, minimalism and value-based spending can be tools for creating those good spending habits without feeling deprived.

Some other tools for living within your means may include:

Start a side-hustle Set a new budget Try a new budgeting rule: 50% necessities / 30% discretionary / 20% savings and investments 70% monthly expenses / 10% savings / 10% donations / 10% investments Living with a roommate / house hack Work from home / work Remote Share: Share this article on Facebook Facebook

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