How to Live Within Your Means for Financial Independence

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

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

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

Why Is Living Within Your Means Important?

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

Of course, the best way to figure out if you’re spending less than you make is by tracking 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 expense tracking my first step.

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

Kick Debt to 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 trim your expenses, you can start paying more than the minimum amount on your debts. This will help you to pay off your debt, rather than paying an endless cycle of interest charges. 

When I use a credit card, I make sure to pay my balance in full right away. I’ve only lost $5 to 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’re not paying interest on an emergency. 

Break the Paycheck-to-Paycheck Cycle

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

The best way to break the paycheck-to-paycheck 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’re spending more than your income. The problem with a negative cash flow is that you’re “borrowing” from your next source of income. 

Other issues of living beyond your means can include:

  • Falling behind on monthly expenses
  • Late fees
  • Low balance fees
  • Possible eviction
  • Repossession of financed items
  • Bigger emergencies

If your goal is financial freedom, you will need to increase your cash flow as much as you can. A greater cash flow means you start investing. And the sooner you start investing, the better. Investing sooner allows you to 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’m pursuing financial freedom to do more things I enjoy, like traveling. And since I started living within my means, I’ve been able to fund a lifestyle change and move in with my significant other. The freedom of my savings allows me to find flexibility through freelance work

How would financial freedom change your lifestyle? Are you looking to get more of your time back? Would you like to travel more? How about spending more time with your family? 

How Do You Live Within Your Means?

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

Four categories create the bulk of my monthly expenses: Housing, Transportation, Food, and Debt. If you can cut large portions of these categories, living within your means will become less difficult. 

There are also themes and ideas that you can implement to live within your means, such as Frugality, Minimalism, Couponing, and Budgeting. These themes reoccur often in the financial independence community. 


I’ve been able to keep my housing expenses around 25% of my net income. That’s because I lucked out and live in a low-cost area. And before I started freelancing, I also had a short commute to work. 

Even if your housing expenses are around 30% of your income, you can still live within your means. If you can, try lowering your utility bills or save on other housing expenses. 


The downside of the low-cost living area is that public transportation is not great — aka nonexistent. Since there’s no public transportation whatsoever, 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 because my significant other sometimes has appointments that require round trips of more than 200 miles.


I value high-quality food over future doctor appointments and health bills. There are still many ways to save on groceries without sacrificing quality. Be sure to try out 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 list of the Dirty Dozen and Clean 15 to see which food items you should splurge on for organic. 


Throughout your financial freedom journey, several themes will become second nature. One of these themes is frugality. Frugality is much more than saving money. It’s about finding the balance between value, wants, needs, and practicality. It’s finding the right “tool” for the job for the right price and perceived value. In my low-cost living area, I can be frugal by shopping at different stores located near each other.

Minimalism & Value

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

I consider myself a minimalist. However, I have a lot of items. When I recently moved, it still required two carloads. I also gave away or sold as many unnecessary items as possible.


Always look out for coupons or sale advertisements for the places you shop most. Knowing what’s on sale and when can be advantageous. If you buy what you need when it’s on sale, you’ll save money. Also, a quick look at the store’s app or paper flier can be a huge return on investment (ROI) for you in the short term. 

In addition to clipping coupons, I suggest you try using the cash-back apps of sites and stores you frequently visit. Saving a few extra dollars when you go out or shop online can help increase your savings rate. 


Either you love budgeting or you hate it. There’s no in-between. If you do choose to budget, my favorite app is You Need A Budget, or YNAB. 

YNAB is particularly helpful 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 for helping you live within your means.

Aging your money by 30 days helps you break the paycheck-to-paycheck cycle. If you get paid every two weeks, or monthly, this means you can go a paycheck or two without getting paid.

Why Is Living Within Your Means Difficult? 

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

Depending on your income, living within your means may be difficult in an area with a high cost of living. In some parts of the country, your housing expenses may well be more than 50% of your household’s income. If you have a lower-income household in a high-cost living area, you must have good spending habits.

Frugality, Minimalism, and Values-Based Spending can be tools to create those good spending habits without feeling deprived. 

Some other tools to help you live within your means might 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
  • Live with a roommate/house hack
  • Work from home/remote work

Leave a Reply

Your email address will not be published. Required fields are marked *